THE Kremlin has stated that the prospects for extending the deal that allows the safe export of grain from some Ukrainian Black Sea ports beyond May 18 are not promising, which raises concerns about the future of the United Nations (UN)-backed sea corridor, reports Reuters.
The agreement, which was reached in July last year, has helped to address a global food crisis that had been worsened by the deadliest war in Europe since World War II.
Ukraine's ports were blocked before the agreement was signed, and it is uncertain if grain shipments would be possible if Russia withdrew.
This would lead to increased insurance rates, and shipowners may be reluctant to send their vessels into a war zone without Russia's approval.
Among the risks that insurers would have to consider is the presence of Russian navy ships in Black Sea waters and floating sea mines.
It is expected that Ukraine's grain exports will decline in the 2023/24 season, as the war has resulted in farmers planting less corn and wheat.
However, favorable growing conditions may limit the extent of the decline. According to the International Grains Council, Ukraine's corn crop is projected to decrease to 21 million tonnes, down from 27 million tonnes in the previous season, with exports expected to drop to 15 million tonnes from 20.5 million tonnes.
Ukraine's wheat production is forecast to fall to 20.2 million tonnes from 25.2 million tonnes in 2022/23, with exports of 11 million tonnes, down from 14.5 million tonnes in the previous season.
Exporting these volumes of grain through the eastern European Union would be difficult and expensive, particularly for crops grown in eastern regions of Ukraine, which face a long and arduous journey to reach the border.
Ukraine has been exporting significant quantities of grain through eastern EU countries since the conflict began, particularly Hungary, Poland, and Romania.
However, there have been many logistical challenges, including different rail gauges.
The railway network in Ukraine is on a 1,520 mm gauge, which is consistent with other post-Soviet countries.
Countries in the eastern EU, on the other hand, use a 1,435 mm gauge, making it impossible to run trains from one network to the other without interruption.
Another issue is that the flow of Ukraine grain through the eastern EU is causing unrest among farmers in the region who say it has undercut local supplies and been purchased by mills, leaving them without a market for their crops.
Poland temporarily blocked imports of Ukrainian grain last week to mitigate the impact on prices, although it said it would still allow transit through the country.
Romanian farmers also blocked traffic and border checks with tractors and trucks.
Ukrainian farmers have dismissed the argument that their exports are reducing profitability elsewhere, but this may intensify if Ukraine needs to export a significantly larger volume through Eastern Europe.
Reduced shipments from major exporter Ukraine have contributed to the global food price crisis, as have climate extremes and the aftermath of the Covid crisis.
If the corridor were to be closed, it would result in a rise in global grain prices, with many countries already experiencing a steep rise in the cost of food and fuel imports.
The United Nations World Food Programme (UNWFP) has stated that food insecurity remains at unprecedented levels.
The protected transit corridor was created in July last year to enable exports to resume from three ports in Ukraine, a significant producer of grains and oilseeds.
Ukraine has been able to export 27.7 million tonnes of agricultural products under the pact, including 13.9 million tonnes of corn and 7.5 million tonnes of wheat.
This represents 60 per cent of Ukraine's corn exports in the current 2022/23 season and 56 per cent of wheat exports.
Other commodities shipped include rapeseed, sunflower oil, sunflower meal and barley.
SeaNews Turkey
SHIPPING NEWS
20 April 2023 - 19:00
Question arises if Russia abandons Black Sea grain deal
THE Kremlin has stated that the prospects for extending the deal that allows the safe export of grain from some Ukrainian Black Sea ports beyond May 18 are not promising, which raises concerns about the future of the United Nations (UN)-backed sea corridor, reports Reuters
SHIPPING NEWS
20 April 2023 - 19:00
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