Commodities 2024: Ukraine corn exports set to fall in 2024 amid logistical issues, Russian attacks

Corn importers in Europe and North Africa expect a consistent stream of Ukrainian exports in 2024, but given persistent logistical difficulties and Russian attacks on infrastructure, there is little chance of a large increase in supply, trading sources said.

After the Black Sea Grain Initiative fell apart in July 2023, Ukraine adopted new routes via Reni and Izmail on the Danube and transit routes through the EU. Alongside this, Ukraine also developed a marine corridor through the Black Sea in August, which has shipped out over 5 million mt of farm produce so far, data from Ukraine's agriculture ministry showed.

Ukrainian farmers have faced immense financial pressures this year, as soaring fuel and fertilizer costs collided with the country's export troubles. But the pressures have eased somewhat since the opening of the new marine corridor.

Farmers are now offloading more grain at the deep sea ports, compared with deliveries along the Danube river. This is due to cheaper and more efficient logistics at the deep sea ports, local market participants said.

"It is much closer, much faster, and better paid," a local broker said.

The price of Ukrainian corn on a DAP basis at Odessa has climbed to around $158/mt in December, up from $135/mt in early October, another Ukraine seller added.

However, the country's corn shipments are likely to see continued delays in 2024 amid logistical bottlenecks, crowded port terminals and repeated attacks by Russia on Danube berths.

In addition, Ukraine has introduced new rules on agricultural exports that include making registration compulsory for food export firms, which will run until Dec. 31, 2024, and are likely to add to further delays and costs, traders said.

Ukraine is expected to harvest around 27 million mt of corn in MY 2024-25, a 3 million mt decline year on year, according to S&P Global Commodity Insights analyst projections. The drop in output is primarily due to a decline in yields, despite stable plantation area under the crop, S&P Global senior grains analyst Victoria Sinitsyna said.

"If the Black Sea marine corridor remains operational, in MY 2024-25 Ukraine will be able to export at least 20.5 million mt, and it can be higher with potentially larger production. Otherwise, corn exports can be hampered," Sinitsyna said. For MY 2023-24, Sinitsyna expects Ukraine to ship out 23 million mt corn.

Drought cuts EU production

The EU has been experiencing increased demand for imported corn due to heatwaves and droughts that have hampered domestic production across parts of the region.

Ukraine and Brazil are expected to remain the major corn suppliers for the EU-27 in MY 2024-25. So far in MY 2023-24, the EU has imported 4 million mt from Brazil and 2.8 million mt from Ukraine.

Ukraine's duty-free access to the EU market became politically contentious in several Central and Eastern European countries.

In late April, Bulgaria, Hungary, Poland, Romania and Slovakia temporarily banned grain imports from Ukraine. The ban aimed to protect local producers facing downward price pressure from the influx of low-cost Ukrainian grain.

"The tension with the neighboring EU states will have a negative impact on Ukrainian exports, if the transit of grains through their territories will be limited," Sinitsyna said.

However, in MY 2024-25, the EU's corn imports are expected to drop to around 18 million mt of corn, compared with 21.1 million mt estimated for MY 2023-24, due to a rise in domestic production, according to S&P Global analysts. The EU is forecasted to harvest 61 million mt corn, around 1.2 million mt higher on year, according to S&P Global data.

War risks

Buying on a FOB basis has become highly undesirable for buyers as they consider the war risks of operating vessels out of Ukraine's ports.

On the other hand, CIF trades remain a lucrative business, with buyers in Spain bidding around $226/mt CIF for corn from Ukraine in January and Egyptian buyers having offered $233/mt CIF.

"Buyers will buy FOB only if it is heavily discounted, but why should seller agree on that?" a Ukrainian seller said.

Meanwhile, corn exports from Romania and Bulgaria are fetching higher premiums.

Platts, part of S&P Global Commodity Insights, assessed FOB CVB corn at $221/mt on Dec. 15, down 26% year on year.