Ukraine’s Black Sea grain export success tested by Red Sea crisis

The export turnaround helped Ukraine’s economy to steady last year and further tamed global food prices after Russia’s invasion in February 2022 drove them to record highs…reports Asian Lite News

Ukraine has managed to boost its Black Sea grain exports to a level not seen since before Russia’s invasion, although the Red Sea shipping crisis poses a new challenge to its crucial agricultural trade.

Kyiv’s success in replacing a UN-backed Black Sea export deal with its own shipping scheme has brought relief for Ukrainian farmers and importing countries while representing a naval breakthrough for Ukraine’s military as a land counteroffensive has stalled.

The export turnaround helped Ukraine’s economy to steady last year and further tamed global food prices after Russia’s invasion in February 2022 drove them to record highs.

Kyiv shipped around 4.8 million metric tons of foodstuffs in December, mostly grain, from its Black Sea ports, surpassing for the first time volumes achieved under the previous UN-sponsored corridor. Moscow quit that deal last July saying commitments to safeguard its own exports were not being respected.

Before Russia’s invasion, Ukraine exported about 6 million tons of food monthly via the Black Sea.

“The alternative Black Sea export corridor from Ukraine has definitely been a positive signal for the agricultural industry,” Svetlana Malysh, senior Black Sea agriculture analyst at LSEG, said, adding: “There are lot of concerns related to the situation in the Red Sea.”

Ukrainian grain exports by sea in January could drop by around 20 percent compared with last month, a senior Ukrainian official said last week, mostly because of the Red Sea crisis.

Strikes on shipping in the Red Sea by the Iran-aligned Houthis who control much of Yemen have stymied trade between Europe and Asia. The Houthis say they are acting in solidarity with Palestinians as Israel strikes Gaza. Their actions have prompted US and British air strikes against Houthi targets.

Passage through the Red Sea is very important for Ukraine as almost a third of its exports via the Black Sea corridor are sent to China.

Under its new export scheme, Ukraine is also supplying grain to Pakistan for the first time since Russia’s invasion, said Alexander Karavaytsev, senior economist at the International Grains Council.

Grain ships are increasingly being diverted away from the Suez Canal-Red Sea route, according to analysts and traders.

“The Red Sea situation is likely to hamper long-haul shipments from Ukraine,” Karavaytsev said.

Ukrainian Black Sea food exports remain substantial. Over January 1-19, about 1.9 million tons were shipped via sea ports and another 1.7 million tons are still scheduled for January, said Spike Brokers, which tracks and publishes export statistics.

Ukrainian producers have welcomed the sea route as an improvement on both makeshift routes via the European Union and the UN-sponsored corridor, under which protracted cargo inspections with Russia drove up vessel charges.

“Since the invasion, now is the best time for farmers in terms of logistics,” said Dmitry Skornyakov, CEO of Ukrainian farm operator HarvEast.

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