Ukrainian grain exports through Estonia are unlikely due to high costs

Grains. Source: Pixabay

Estonia could help to export Ukrainian grain, but this is unlikely due to high delivery costs.

Since Russia's withdrawal from the Black Sea Grain Initiative, an agreement on the safe transportation of grain and foodstuufs from Ukrainian ports between Ukraine, Russia, Turkey and the United Nations during the Russian invasion of Ukraine, world grain prices have risen by around 15 percent.

The price is also very volatile. Marge Pähkel, head of Scandagra's Estonian grain business, said. "As soon as we learned that the ports had been attacked, the price increased once more, albeit only by a few percent. As it became apparent that the ports and infrastructure may not have sustained as much damage as initially believed, the market resumed a bit again. These patterns  fluctuate quickly during the day," Pähkel told ERR.

Even though global grain prices have risen, Ukraine's major farms told Bloomberg they intend to reduce their production this year. On the HarvEast farm, one-third less wheat is now being planted.

Also the CEO of IMC, Aleks Lissitsa, said that the price of cereal grains no longer covered production costs.

Pähkel explained that the logistical costs of making this export via European ports are very high for Ukrainian farmers. "The price that a Ukrainian farmer gets is much lower indeed. The logistics simply eat into that price," he said.

Sowing in the next few weeks will affect next year's harvest and could influence the grain market for the next two years, Bloomberg writes.

Smaller exports from Ukraine expected already this year, Pähkel added. "It was predicted that Ukraine would be able to export about 33 million tons, but since this Black Sea corridor is no longer working, it is expected that Ukraine's exports will decrease by 30 percent."

Lissitsa said the produce is now piling up in Ukrainian warehouses. The farm manager explained that there is a volume limit on exports via the Danube.

Baltic ports could help

The grain warehouses of Ukraine's neighbors are also jammed with Ukrainian grain.

A few weeks ago, Latvia and Lithuania proposed that grain leaving Ukraine could also be sent via Baltic ports.

Estonia could help, said Madis Pärtel, undersecretary for the Ministry of Regional Affairs and Agriculture.

"Estonia certainly has the capacity to store hundreds of thousands of tons and ship them out from here," Pärtel said. "However, due to the difference in track gauge between Poland and the Baltics, there would be a bottleneck on the Polish-Lithuanian border."

"As things stand, the chances of these crops ending up here are slim," Pärtel said.

Transport costs would also be high. The idea has been floated that the European Commission could help pay for them.

The European Union has already supported Ukraine's grain exports in many ways, Pärtel said, adding that no money is currently earmarked by the Commission to solve the problem of transhipment at the Lithuanian-Polish border.

Some of the Ukrainian produce would also be welcome in Estonia right now, Pähkel continued.

"This year, particularly in the Baltics, yields are reduced due to the springtime drought. It is possible that several million tons will be lost in Estonia, Latvia and Lithuania. Perhaps it would be advantageous to our countries to export it from our ports," she said.

On the other hand, there is a risk that the same concerns will arise that have prevented Poland, Slovakia, Hungary, Romania and Bulgaria from allowing Ukrainian grain onto their markets.

Pärtel said this would certainly be a problem during the peak grain production season. "We have a sizable capacity to assist, but if we take our own harvests and combine them with the quantities that could potentially come from Ukraine, the issue arises as to whether or not it can all be taken from here," he said.

The five country ukraine export ban, introduced in May and enforced by Poland, Bulgarian, Hungary, Slovakia and Romania on imports of Ukrainian wheat, maize, rapeseed and sunflower oil is due to end on September 15; however, now an extension is being sought for it. Estonia would like to find another solution to the concerns of Poland and other countries, Pärtel said.

Only Russia wins from the confusion

There's still quite a lot of confusion about the language, Pähkel said. At the same time, concerns about Ukraine may not have as much impact on the grain market as feared. The world's cereal prices are still affected by the yields of the other world's cereal-growing regions.

"This year [cereal production] has been successful in major regions, with good yields. Therefore, the fact that less grain is coming from Ukraine does not generally affect the world market price as such," Pähkel said.

At the same time, Russia benefits from the confusion. The importance of Russian grain on the world market is very high.

"In Russia, the harvest is also expected to be very hard this year. In terms of price levels, Russian wheat is the most competitive on the world market today. In any case, it has an interest to export its own grain and to prevent Ukrainian grain exports," Pähkel said.

A lot of grain in storage in Russia also from last year and, as with energy, Russia may decide to start manipulating the grain market, Pähkel said.


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Editor: Kristina Kersa

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