Ukraine's grain exports flourish amidst expired Black Sea Initiative

Over the past few months, Ukraine has witnessed a remarkable surge in grain exports, signalling a robust agricultural industry.

"Despite the expiration of the Black Sea Grain Initiative, which once governed the region’s trade dynamics, Ukraine’s grain shipments have surged, contributing approximately 25 billion tonne miles monthly," says the latest update from Drewry.

During January and February 2024, Ukraine consistently exported an average of four million tonnes of grain per month, the update added. "This signifies an impressive 100 percent surge when compared to the preceding months. While these export figures are still beneath the levels seen before the conflict, they surpass the volumes recorded during the concluded Black Sea Grain Initiative."

The surge in grain exports has led to increased demand for shipping services with almost 150 dry bulk vessels loading grain at Ukrainian ports monthly 2024 onwards. "This surge has pushed grain shipping demand up by over 13 percent y-o-y. If this trend continues throughout 2024, Ukrainian grain could contribute more than 1.3 percent to the total dry bulk tonne miles this year."

Post-Grain Initiative export routes
In response to the expiration of the Black Sea Grain Initiative in July 2023, Ukraine swiftly adapted by establishing alternative export routes, the update added. These include a corridor along its western Black Sea coast, utilising smaller ports on the Danube River and overland routes via Eastern Europe.

The increased grain exports have not only provided relief for Ukrainian farmers but also benefited countries heavily reliant on grain imports. Notably, recent shipments departing from Odessa have been destined for Egypt, a major global grain importer, the update added.

Challenges and geo-political factors
Challenges persist, particularly in trade with East Africa and Asia. "The recent attacks by Houthi rebels in the Red Sea have complicated shipping routes, especially those typically facilitated via the Suez Canal. Asian customers for Ukraine's grain, including Indonesia, Pakistan and Bangladesh, face uncertainties. Proximity has led to the majority of exports being directed to Europe.

"To sustain sales growth, particularly in North Africa and the Eastern Mediterranean where competition from Mediterranean and Black Sea sources is intense, Ukraine should prioritise maintaining competitive export prices. This approach is crucial in preventing the rerouting of shipments around the Cape of Good Hope to reach Asia, a move that could lead to extra shipping expenses and potentially exert downward pressure on Ukraine's FOB prices in a netback context."

The establishment of alternative export routes and competitive pricing strategies demonstrate Ukraine's commitment to maintaining its position in the global grain market. As geopolitical challenges persist, the nation's ability to navigate these obstacles will be critical for sustaining its current success in the international grain trade, Drewry added.