Ukraine grain exports face uncertain future amid EU curbs, Black Sea corridor talks

Farmers in Ukraine are concerned about future grain exports as they look for stable shipment routes, irrespective of the outcome of discussions on extending the Black Sea grain deal.

Ongoing tensions over the Black Sea Grain Initiative have already slowed trade flows through the corridor. According to a statement from the UN coordinator for the Black Sea Grain Initiative on May 9, exports during April through the corridor were at 2.8 million mt, down 29% on the month.

This happened as several EU countries banned imports from Ukraine citing supply glut and depressed local prices.

"Even if the grain deal is extended, there is no certainty that exports will take place properly," a farmer based in Ukraine's western region of Khmelnytskyi said.

While most farmers and trade participants await the outcome of the negotiations underway in Turkey, there is a sense of dissatisfaction over the deal. The discontent stems from previous experiences, with Russia pulling out of the deal in November 2022 and delaying vessel inspections over the past few weeks.

"There is a huge backlog of vessels under the Black Sea grain deal. Even if the deal is extended, that might not be of great help to export wheat, corn and other farm produce," a trader with a multinational company said.

The Ukrainian restoration ministry said on May 8 that 90 ships, including 62 vessels for loading, were waiting on Turkey's territorial waters for approval to go to Ukrainian ports. Inspections resumed on May 9 after a two-day halt.

The Ukrainian ministry said delayed inspections hampered Ukrainian farm shipments, and exports through the corridor remained lower than 3 million mt in April.

"We do not envisage any apocalyptic scenario due to a million circumstances. Ukrainian farmers and Ukrainian traders have shown that they can do a lot, and a lot of [export] routes can be laid," agriculture minister Mykola Solsky was quoted by his ministry as saying late on May 9, without giving further details.

Till April 30, Ukraine's wheat exports in marketing year 2022-23 (July-June) fell 22.4% on the year to 14.4 million mt, the country's agriculture ministry said. S&P Global Commodity Insights analysts expect Ukraine to sell 15 million mt of wheat in MY 2022-23 and 12 million mt in MY 2023-24.

Meanwhile, Ukraine's corn exports rose 15.1% on the year to 24.4 million mt for MY 2022-23 as of April 30, the ministry said. S&P Global analysts forecast Ukraine to export 25.4 million mt of corn in MY 2022-23 and 18.5 million mt in MY 2023-24.

EU restrictions to hit Ukrainian exports

The trade restrictions that the European Commission imposed in April have become a major source of worry for Ukrainian farmers as the EU had become the largest buyer of its grains over the past few months.

Over July-April, Ukraine's share in EU's wheat imports increased to 63% for MY 2022-23, compared with 16% in the previous year, and EU's corn imports were up 4 percentage points on the year at 56%, EU crop observatory data showed.

Imports from Ukraine increased sharply as the EU removed tariffs on Ukrainian grains in March 2022 to show solidarity following Russia's invasion a month earlier.

While the aim was to give Ukrainian farmers an outlet to ship grains and oilseeds to their traditional markets in Africa, the Middle East and Asia, and help ease a global food crisis, significant quantities remained in Eastern Europe, leading to a supply glut and depressed local prices.

"This led to poor sales amid the harvest and storage of cereals by farmers, leading to an increase in inventory costs and lower prices," a farmer based in Poland said.

During April, four eastern European nations -- Poland, Hungary, Slovakia and Bulgaria -- imposed unilateral restrictions to protect local prices and help farmers. Romania also complained about lower prices and a supply glut.

The unilateral bans were lifted after the European Commission agreed to block sales of Ukrainian wheat, maize, and other products within those five member states over May 2-June 5. This may be extended later.

EU regulations, however, allow Ukrainian grains to pass through these countries en route to other destinations.

If normal trade with the EU does not resume, farmers will have to transport grains through eastern European nations to other destinations, which will cost more, a trader based in Poland said. Currently, it costs about Eur100/mt ($109.53/mt) to ship the grains out to eastern Europe, a farmer based in Ukraine said.

Talks on Black Sea grain deal extension

Over May 10-11, Russia and Ukraine, along with the UN and Turkey, will negotiate to extend the grain deal beyond May 18.

The extension of the Black Sea grain corridor deal, inked in July 2022 to allow exports through three Ukrainian ports -- Odesa, Chornomorsk and Yuzhny -- has been under doubt since its latest renewal March 18.

Ukraine, the UN and Turkey extended the deal for 120 days, while Russia suggested a 60-day renewal.

"Since the renewal on March 18, delayed inspections have led to a slower pace of exports," an official with the Ukrainian agriculture ministry said.

The Russian foreign ministry said the deal may not be extended beyond May 18 unless a list of demands is met to remove obstacles to its own grain and fertilizer exports.

Platts, part of S&P Global, on May 9 assessed Russian 12.5% FOB wheat at $257/mt and Ukrainian 11.5% FOB wheat at $254.50/mt, both unchanged from May 5. Platts assessed Ukrainian FOB corn at $224/mt, also unchanged.

There were no assessments on May 8.