Navigating Challenges: Ukrainian Corn Exports and Geopolitical Disruptions

Published 2023년 11월 23일

The Ukrainian corn industry has grappled with geopolitical tensions and logistical disruptions, particularly fueled by the conflict with Russia since Feb-22, significantly impacting corn exports. Despite successfully supplying 29.5 mmt in MY 2022/23 under the Black Sea Grain Initiative, disruptions in port operations and Russia's withdrawal in Jul-23 led to a decrease in Ukrainian corn exports by 48% YoY to 3.9 mmt shipped from Jul-23 to Oct-23. Nonetheless, Ukraine exhibited resilience by redirecting exports through Danube River ports and land routes via the EU. In addition, with production forecasts increasing by 9% YoY to 29.5 mmt in MY 2023/24, coupled with declining freight rates, the country is poised for potential export growth. Prospective Ukrainian corn sales to China further highlight Ukraine's adaptability in boosting exports amidst challenging situations.

The Ukrainian corn industry has encountered challenges influenced significantly by geopolitical tensions and logistical disruptions. The conflict with Russia, stemming from the invasion in Feb-22, notably contributed to fluctuations in Ukrainian corn exports.

Previously, during the marketing year (MY) 2022/23 (Jul-22 to Jun-23), Ukraine managed to supply 29.5 million metric tons (mmt) of corn to the global market thanks to the Black Sea Grain Initiative (BSGI) deal. Moreover, sales to the European Union (EU) surged by 87% year-on-year (YoY), reaching 18 mmt of corn in MY 2022/23. Effective from Jul-22 to Jul-23, the BSGI enabled Ukraine to sustain corn exports during this period, utilizing ports like Chornomorsk, Odesa, and Pivdennyi. Notably, the EU served as the major destination, functioning as an intermediary point rather than the final destination for 55% of Ukraine's grain exports.

Figure 1. Monthly Trends of Ukrainian Corn Exports

Source: Ministry of Agrarian Policy and Food of Ukraine

However, ongoing port facility disruptions due to Russian attacks, coupled with Russia's withdrawal from the BSGI in Jul-23, severely impacted Ukraine's export capabilities for the current season. Ukrainian corn exports saw a drastic 48% YoY decline, with only 3.9 mmt shipped from Jul-23 to Oct-23.

Despite these setbacks, Ukraine has demonstrated resilience by exploring alternate export routes. Following Russia's withdrawal from the BSGI deal, nearly all exports shifted to the Danube River ports of Reni and Izmail and transit routes by land through the EU. This comprised shipments via land routes and ports, directed towards other neighboring EU ports to larger vessels before shipment out the Black Sea to their final destination.

In the midst of its harvesting season, Ukraine has reaped 24 mmt of corn from 77% of the areas in Ukraine, with a yield of 7.24 metric tons (mt) per hectare (ha) as of November 15, 2023. This aligns with the optimistic harvest forecasts at the level of 29.5 mmt, an increase of 9% YoY.

Figure 2. Production and Yield of Ukrainian Corn

Source: USDA

Decreasing Freight Rates Has Influenced Ukrainian Corn Export

Lowering freight rates could positively impact Ukraine's global market competitiveness, potentially alleviating the effects of geopolitical disruptions. Freight rates for Ukraine's grain transportation have been decreasing, with reductions observed in land freight across the EU and sea freight from the Danube River ports. As of November 16, 2023, there has been a decrease in freight prices according to the Ukrainian Association of Grain Producers. Specifically, the rates for transporting Ukrainian corn via coastal ships (coasters) weighing 6000 mt from the Danube ports of Reni and Izmail to Seville have decreased by 14% YoY. The current rate stands at USD 52/mt, reflecting a decrease from USD 60/mt in the previous year's pricing.

Considering higher production forecasts and reduced freight rates, Ukraine stands poised to boost corn exports. In addition, there’s news about potential sales of Ukrainian corn into China for December shipments. It is expected that China will import 1 mmt of Ukrainian corn for December shipments, an increase of 249% YoY from Dec-22. If it is confirmed, this could lead to an increase in Ukrainian corn export volume in MY 2023/24.

This underscores the resilience of Ukraine's corn industry in the face of various challenges. It exemplifies Ukraine's efforts to navigate geopolitical disruptions, explore alternative trade routes, and adapt to fluctuating market conditions.