Ukraine is a major global wheat and corn grower and before Russia’s invasion in 2022 the country exported about 6 million tons of grain alone per month via the Black Sea.

Grain sales are a crucial revenue source and while global prices are weak, Ukraine’s cash-strapped farmers have little choice but to push ahead with exports because they need to fund the next winter sowing season.

Ukraine doubled food exports in July to over 4.2 million metric tons from the same month last year, according to data from Ukraine’s UGA traders’ union, despite intensified Russian attacks on Odesa, a key Black Sea export hub, and Izmail, a major port along the Danube River taking grain into Europe.

Ukraine has not yet reported the destinations of its exports in July, but last season it exported most of its wheat to Spain, Egypt and Indonesia, with its corn mostly heading for Spain and China.

The surge comes despite this season’s drop in output caused by war-related disruptions, and there is no guarantee that Kyiv can sustain the trend into the full 2024/25 season.

“We are doing everything to make business feel comfortable even in wartime conditions,” Dmytro Barinov, deputy head of Ukraine’s Seaport Authority, told Reuters.

The exports are a combination of new season wheat plus corn from stocks following last year’s bumper harvest.

So far, Ukraine has exported 3.7 million tons of agricultural goods in July through Odesa and 569,000 tons via the Danube, export data showed. That compared with 291,000 tons via Odesa and 2.07 million tons through the Danube in July 2023.

There were six shipments of corn from Ukraine’s other two operational Black Sea ports of Chornomorsk and Pivdennyi in June and July to Rotterdam, Europe’s busiest port, and Spain’s Cartegna, separate LSEG shipping data showed.

Since July, Ukraine has also shipped cargoes to China, Egypt and Turkey, separate data from Kpler showed.

Despite last month’s stronger sales, overall exports for the 2024/25 season are expected to fall because of unfavourable weather and the war’s impact, the ASAP agricultural consultancy said.

“We expect that grain exports from Ukraine could plunge by 14.5 million tons per year and touch almost a decade low of 35 million tons,” ASAP said.

Ports targeted

Ukraine has managed to create a shipping corridor after a U.N.-backed Black Sea grain export initiative collapsed last year. Russia’s Black Sea Fleet has been forced to move nearly all its combat-ready warships from occupied Crimea to other locations.

While the improved security situation has lowered insurance and freight rates, making exports more competitive, Kyiv’s challenge is to ensure its ports that are accessible can ship out cargoes.

Ukraine has sustained multiple missile and drone attacks in recent weeks, some of which have targeted Odesa and Izmail.

Even as ships have so far avoided any major damage, Ukrainian officials say port infrastructure is being targeted.

“The Russians are well aware of that and they’re hitting the weak spots,” said Barinov with Ukraine’s Seaport Authority.

“They’re hitting with precision missiles, they’re deliberately destroying our ability to export, to process.”

Barinov and other shipping officials said Russia was avoiding strikes at the international sea lanes outside of Ukrainian port limits, keeping escalation contained.

Ukraine’s military assists ships entering and exiting ports, with captains operating under specific safety instructions, the country’s navy chief Vice-Admiral Oleksiy Neizhpapa told Reuters.

“Ukrainian air defence forces cover these corridors and ports. All assets, from air defence groups to missile systems along the coast, contribute to this effort,” Neizhpapa said.

Nonetheless, Ukraine has to cope with a multitude of other difficulties, including energy blackouts that disrupt port operations and exports.

Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect, part of Pen Underwriting, said Russian strikes at targets inside Ukraine while less frequent than earlier in the war, continued to pressure Kyiv.

“Such attacks persist in applying pressure on the commercial maritime environment in Ukraine and thus achieve the Russian intent of eroding Ukrainian ability to fully capitalise on the potential output from these ports.”

Additional war risk premiums for ships entering Ukrainian ports have been quoted in recent months at up to 1.2 per cent of the value of the ship with discounts that could mean a lower rate, insurance sources said. Those premiums spiked to as much as 3 per cent in November after a missile strike damaged a ship in Pivdennyi.

This still works out at hundreds of thousands of dollars in additional estimated costs for a seven-day voyage and those costs could increase if security conditions deteriorated.

Industry sources said war underwriters were keeping the situation under review in the light of the recent attacks.

“Increased shelling of ships in corridor ports may prompt reinsurers to revise their war risks insurance rates,” said Maksym Dubovyi, managing partner with insurance broker Atria.

During its year of operation, Ukraine’s sea corridor has enabled 2,059 ships to deliver 57.7 million tons of cargoes to 46 countries, including 39 million tons of agricultural products, said Neil Roberts, head of marine and aviation at the Lloyd’s Market Association, which represents the interests of all underwriting businesses in the Lloyd’s of London insurance market.

“Individual underwriters will decide the rate as appropriate in the light of events and take their own view on the risk.”

– Reporting by Jonathan Saul and Tom Balmforth in London, Pavel Polityuk in Kyiv.

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Last week’s attacks mostly struck the sea ports of Odesa but Monday’s pre-dawn strikes hit infrastructure along the Danube, an export route whose importance has grown since the demise of the deal allowing Ukrainian grain transit via the Black Sea.

“The Russian terrorists have again attacked the Odesa region overnight. Port infrastructure on the Danube river is the target this time,” regional governor Oleh Kiper wrote on the Telegram messaging app.

Global wheat and corn futures rose sharply on fears that Russian attacks and more fighting, including an overnight drone strike on Moscow, could threaten grain exports and shipping.

News website Reni-Odesa cited a local official as saying three grain warehouses had been destroyed in the Danube port city of Reni during a drone attack.

Video footage obtained and verified by Reuters showed a man cursing in disbelief at several damaged grain warehouses at Reni, an important transport hub across the Danube to NATO and European Union member Romania.

“This recent escalation poses serious risks to the security in the Black Sea,” Romanian President Klaus Iohannis said on Twitter, drawing attention to the proximity of the attack to Romania’s border.

Since Russia’s full-scale invasion in February 2022, Ukraine has expanded grain exports overland via the EU to about 1 million tons a month, with large volumes being exported from Romanian ports and along the Danube.

“Russia has in the past months not attacked Ukraine’s overland and inland waterways grain infrastructure,” one European trader said. “Any interruption of this traffic could quickly hit international grain supplies.

A French trader called it a “major development and a major blow” to Ukrainian exports, adding: “Without the Black Sea corridor and now with attacks on alternative routes, it will be hard to take Ukrainian grains out of the country.”

Kiper said: “Russia is trying to fully block the export of our grain and make the world starve.”

‘Food terrorism’

Ukrainian officials gave few details but police said warehouses storing grain crops had been hit along with tanks for storing other types of cargo, causing a fire.

Seven people were wounded and one of them was in a critical condition, Kiper said.

Police published photographs showing the damaged facilities, and containers marked with the logo of Maersk Group could be seen in one of the images.

Some Ukrainian news outlets reported explosions overnight in the area of Izmail, another important Ukrainian Danube port, but no firm reports of damage followed.

“It (Russia) tries to extract concessions by holding 400 million people hostage,” Ukrainian Foreign Minister Dmytro Kuleba wrote on Twitter. “I urge all nations, particularly those in Africa and Asia who are most affected by rising food prices, to mount a united global response to food terrorism.”

Russian wheat prices jump

Last week, Russian wheat export prices jumped along with global prices after Russia’s withdrawal from the Black Sea grain deal and amid restrictions on navigation in the Kerch Strait, analysts said.

According to the IKAR agriculture consultancy, the price of 12.5% protein Russian wheat scheduled for free-on-board (FOB) delivery in the second half of August jumped to $242 a ton at the end of last week from $228 a ton the week before.

Russia-focused agricultural consultancy Sovecon estimates total Russian wheat exports in July at 4.3 million tons, compared to 2.5 million tons in July 2022 and 2.8 million tons on average historically for the month of July. Russian wheat exports have been at record highs in recent months due to large stocks and high yields.

Russia exported 1.2 million tons of grain last week compared to 960,000 tons a week earlier, including 1.1 million tons of wheat compared to 820,000 tons a week earlier, Sovecon wrote in its weekly note, citing port data.

–Reporting for Reuters by Olena Harmash, Tom Balmforth, Olga Popova and others.

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His silos are still crammed full with 1,100 tonnes of grain from last year’s harvest that he can’t export due to the closure of Ukraine’s sea ports following Russia’s invasion in February.

While some crops have left by rail or road via neighbours such as Romania and Poland, millions of tonnes have piled up on farms and a lack of shipments from one of the world’s biggest grain exporters is pushing up global food prices.

The U.S. Department of Agriculture estimated this month that Ukraine ended the 2021-22 season in June with 6.8 million tonnes of corn, an eight-fold rise from the a year earlier, while wheat stocks almost quadrupled to 5.8 million.

U.N agencies have warned that lack of Ukrainian grain, which typically goes to the Middle East and Africa, is threatening starvation and mass migration on an “unprecedented scale.”

Farmers such as Tereshchenko, in regions where sending grain via rail or road to eastern Europe is problematic, will have to sell their harvest at a huge loss if they can’t store it, leaving less cash to buy seeds, fertilisers and chemicals for next season and exacerbating expected falls in Ukraine’s output.

Tereshchenko farms as part of a collective of 30 people near Khreshchate, a village of 700 people some 120 km from the Russian border that was shelled and bombed during the first month of the war.

The villagers mostly hid in cellars during strikes that destroyed the roofs of the farm, Tereshchenko said. Thirty cows and pigs were killed.

‘This is a catastrophe’

Once Russia withdrew to focus on capturing a swathe of Ukraine’s east after failing to take the capital Kyiv, sappers combed fields that had been littered with the detritus of war, defusing mines and ordnance. Farmers then went through the fields using tractors to drag rockets out of the soil.

Almost no money has come in to the collective, which has only managed to sell some sunflower seeds at very bad prices.

“We have our own storage. But it’s full with the grain that we haven’t been able to sell,” Tereshchenko told Reuters.

The future of his farming business, and many others in the war-torn country, could now hinge on talks which are expected to continue this week on opening up a sea corridor to allow exports via Ukraine’s Black Sea ports to resume.

He hopes the sea route will reopen but fears what will happen if it doesn’t.

“For me, personally, this would be the death of all my dreams and plans in life. I’m 60, what else is there?” he said.

“For the collective, this is a catastrophe. They’ll be without work, without bread. I’m a pensioner, I can hang in there. But for the people, it will be a catastrophe, just a catastrophe.”

Prices for grain have plunged in Ukraine in recent weeks as farmers try to clear space in their silos for the new harvest.

According to the APK-Inform consultancy, the bid price for third-class milling wheat in Ukraine slumped to 3,100-3,400 hryvnias per tonne on July 8 from 7,650 hryvnias (about C$333) in mid-April.

“The price of all grain has gone down, and the cost of logistics has gone up so much that it just destroys everything — the farmer has no more income,” a foreign grain trader who works in Ukraine said.

‘Silos will overflow’

At the Baryshivska Grain Company, a medium-sized enterprise in Nizhyn in the northern Chernihiv region, Yevhen Prymushko, the director of the firm’s silo and storage operations said the plight of smallholder farmers was particularly bad.

He said the company used to be able to offer services to them, but pressure from the export blockade meant it had no spare storage capacity to offer.

Before the war, their silos could hold 72,000 tonnes of grain, but a rocket strike destroyed the roof of one. The bombardment slashed the overall capacity by 15,000 tonnes and destroyed a smaller 1,200-tonne storage facility.

“We won’t be able to give services to smallholder farmers. They won’t have anywhere to put their grain. We chat to them, they’re asking for us to store just a little bit,” Prymushko said.

Kees Huizinga, a Dutch national who runs a 15,000-hectare dairy and crop farm about 200 km south of Kyiv, said farmers plan to repurpose workshops and cow barns to store grain harvested this season.

He has also purchased about 60 plastic storage sleeves, known as “ag bags,” for US$1,000 each. A bag can store 250 tonnes of grain, giving him the ability to store another 15,000 tonnes.

Oleksandr Haidu, head of the Ukrainian parliament’s agrarian committee, said Ukraine needed about 80,000 such sleeves and that the legislature was planning to create preferential conditions for the sleeves by waiving import duties.

“Unfortunately, some farmers are already selling what they harvest below net cost. Some do not even know whether to harvest at all,” he said.

“If we don’t step up now, and export routes don’t expand, our silos will overflow in October, farmers will sell their crops for next to nothing, will not be able to pay rent, and eventually refuse to sow next year.”

Ukraine was once the third-biggest grain exporter in the world but it is gradually slipping down the league tables. That trend is likely to be exacerbated next year if farmers lack the cash to buy seeds and fertilisers, or any incentive to plant crops if they can’t be shipped.

“Farmers cannot cover their costs with the price, and if nothing changes in the near future, then we can expect a decrease in the area of autumn sowing,” said Maria Kolesnyk, an analyst with ProAgro consultancy.

— Reporting for Reuters by Tom Balmforth and Pavel Polityuk; additional reporting by Maytaal Angel and Nigel Hunt in London.

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Nearly 25 million tonnes of grains are stuck in Ukraine, unable to leave the country due to infrastructure challenges and blocked Black Sea ports including Mariupol, a U.N. food agency official said last week. Mariupol has endured the most destructive fighting of the 10-week war.

Food prices soared to record highs in March following Russia’s invasion of the world’s No. 4 exporter of maize (corn) in the 2020-21 season and the sixth largest wheat exporter. Prices eased slightly in April.

“We know people around the world are going to be starving because of the actions of Russia,” Trudeau told Reuters in an interview.

“There is grain waiting to be shipped in Ukraine. We have to make sure that Russia doesn’t prevent the grain that the world needs from getting out to the world.”

Since Moscow launched what it calls a “special military operation” in late February, Ukraine has been forced to export grain by train over its western border.

Kyiv has also been looking to use ports on the Danube river in the country’s south to help with exports.

Shipments via Danube river ports could be part of the solution, Trudeau said, not revealing details. He added that a number of options were being considered.

“We’re just looking to solve a very direct problem,” he said.

Canada’s Foreign Minister Melanie Joly, speaking on Monday in a telephone interview from Berlin, said the idea is to find multiple ways to get grain out of Ukraine, and that Turkey’s co-operation would be important.

“We will work to make sure that there are different routes that can be used,” Joly said.

“We will work with different countries, including Turkey, as we know that the Bosphorus is fundamental to the access of the Black Sea,” she added.

Analysts have warned that Ukraine will face a significant shortage of storage facilities in the 2022-23 season due to a sharp fall in exports.

Trudeau, in an unannounced visit to Ukraine, said after his meeting with President Volodymyr Zelenskiy on Sunday that Canada was providing $25 million to the U.N.’s World Food Programme as part of efforts to uphold food security.

Canada will also remove trade tariffs on all Ukrainian imports to Canada for next year.

“It doesn’t serve anyone if Vladimir Putin’s war is not just killing Ukrainians, but is starving people around the world,” Trudeau told Reuters, referring to Russia’s president.

— Reporting for Reuters by Tom Balmforth in Kyiv; additional reporting by Steve Scherer in Ottawa, writing by Lidia Kelly in Melbourne.

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