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World Commodity Markets Monitoring Ukraine Harvest and Exports

09/25/2022

Following the agreement between Russia and Ukraine to allow free passage of grain-carrying vessels in the Black Sea, approximately two million tons of corn with some soybeans, sunflower meal and barley have been shipped from the three designated ports of Odessa, Chornomorsk and Pivdennyi.  The port of Mykolaiv was excluded from the agreement but is the second largest export terminal.  The potential combined capacity of the three ports is 3.0 million tons per month. 

 

It is estimated that the 3 to 4 million tons of commodities stored in the three ports were moved during August through mid-September to make room for the incoming 2022 Harvest.  Approximately 20 million tons of wheat will have to be shipped in addition to approximately 20 million tons of grain stored in silos through Ukraine.  It is difficult to see how Ukraine will be able to export 6 million tons in each of October and November.  Export volume has been restricted to relatively small vessels to date. Ocean freight operators are concerned over safety of vessels and crews due to the presence of sea mines laid by both Ukraine and Russia, some of which are now free floating, representing a danger to navigation.  Insurance will only be offered to ship operators if vessels are assured of free passage and the absence of mines.  Lloyd’s of London is extending $50 million cover for every voyage but with high insurance rates that will be added to the cost of grain.

 

President Putin of the Russian Federation has indicated that the July free-passage agreement will be renegotiated, and he will evidently demand concessions for Russia in exchange for extending the agreement.  It is evident that the naval forces of NATO, including the U.S., may become involved in maintaining free passage of vessels, a situation that could escalate hostilities and disrupt world prices for commodities. 

 

The Ministry of Agriculture in Ukraine estimates a total corn harvest of 25 to 27 million metric tons down from 42.1 million in 2021.  Due to hostilities, total grain and oilseed production will be halved to approximately 50 million metric tons.  To date, 26 million tons of grain has been harvested from the 2022 crop, representing 60 percent of the seeded acreage.