Ukraine's 2022-23 grains exports in spotlight for USDA's May report

As the world's wheat and corn importers struggle to assess the longer-term impact of Russia's invasion of Ukraine, May 12 will provide the first opportunity to see the US Department of Agriculture's production and export estimates for the marketing year 2022-23 (July-June).

The March and April editions of the USDA's World Agricultural Supply and Demand Estimates were both presaged with a warning that they represented "short term impacts" at a time of "increased...uncertainty of agricultural supply and demand." The USDA is familiar with the vagaries of weather and farmers' crop preferences, but its May report will also have to include an implicit assessment of Ukraine's rail capacity and its farmers ability to plant, cultivate and harvest in a time of war.

Prior to Russia's invasion on Feb. 24, the USDA had been expecting Ukraine to export 24 million mt of wheat and 33.5 million mt of corn. Based on those estimates and lineups for the first eight months of the marketing year, the country still had 5.1 million mt of wheat to export and 12.2 million mt between Feb. 24 and June 30, which represents an average of more than 4 million mt/month. Ukraine's agriculture minister Mykola Solskyi said May 9 that the country had exported 1.09 million mt of grain in April.

Ukraine deep sea ports, such as Odessa, Pivdennyi and Chornomorsk, typically handled more than 90% of the country's grain exports. Their closure in late February has forced exporters to seek alternatives -- primarily by rail through into Romania, as well as into Poland, Moldova, Slovakia and Hungary. Exporters have also taken coasters and barges from Ukraine's Danube river ports, mainly Izmail and Reni. However, these routes are not equipped to carry such large volumes of grain.

"Classically rail transport for cross border transshipment is for a whole range of goods other than grains," said Peter Heston, the operational director of GN Terminal.

Many of the scheduled cargoes are getting delayed or cancelled, said Heston, who is responsible for an export terminal and storage in Ukraine. In a recent presentation, he took rail data from April 17. "Out of 18 planned locomotives, 12 actually transshipped," he said, adding that the wagons that did leave the country carried around 17,000 mt of grains in total, implying average monthly exports of slightly more than 500,000 mt.

"Handling volume has increase greatly in the past weeks," said Heston, noting that the most optimistic estimates allow for Ukraine to transship 1.2 million wagons a year, across all cargoes including iron ore, steel and coal. He estimates that Ukraine's annual rail shipments are likely to be around 1 million mt per month and are unlikely to exceed 16 million mt for the full year.

As for the Danube ports, prior to the war, they were shipping around 400,000 mt a year, primarily in coasters for Turkey, Italy and North Africa. Heston estimates that the maximum they could ship in a month is 196,000 mt. Recently, corn from these ports has been offered at a steep discount to levels at the nearby Romanian port of Constanta since some Ukraine-based sellers have been under pressure to generate cashflow.

Ukraine exported 16.85 million mt of wheat and 23.86 million mt of corn in MY 2020-21, which represented 8% and 13% of total global exports respectively. Favorable weather in MY 2021-22 helped to boost production of both crops by more than 25%.

In total, when combined with smaller cross-border shipments by truck and ferry, Heston estimates that Ukraine's currently operating infrastructure means that its combined export handling for grains and oil seeds is unlikely to exceed 15 million mt/year, or around a fifth of the typical total.