Prior to the unprovoked invasion of Ukraine by the Russian Federation, both nations relied on the Black Sea for transport of wheat, corn, oil seeds and other agricultural commodities to buyers worldwide. After the invasion Ukraine could only export from the ports of Mykolaiv, Odessa and Chornomorsk.
The Black Sea Grain Initiative, negotiated by the United Nations and Turkey, allowed restricted passage of grain vessels from ports in Ukraine to market. Cancellation of the agreement in July was followed by intensive bombardment of Ukrainian ports with as many as 150 installations and grain facilities destroyed in more than 20 intensive attacks. In addition it is estimated that Russia has destroyed up to 300,000 metric tons (12 million bushels) of various grains. Export capacity from ports in Ukraine has been reduced by 40 percent forcing shipments to use Danube River installations, rail and restricted sea passage.
The Black Sea has become an important zone of war with the two belligerents conducting a stalled land war along the Dnieper River. Advances by Ukraine infantry and armor have been minimal and the land war is now an artillery duel supplemented with the use of drones and missiles. Ukraine has used its minimal naval resources to optimal advantage, driving vastly superior Russian naval vessels eastward to the Russian coast around their major base at Novorossiysk. The Crimean base in Sevastopol has been abandoned by Russia following strategic strikes. This has allowed Ukraine to establish a sea-lane hugging the coasts of Romania and Bulgaria, both members of NATO, to allow passage to and through the Bosporus. Since the alternative coastal route was established, 21 bulk grain carriers have transited southward, but their collective volume is far less than the 33 million tons exported during the 12-month duration of the Black Sea Grain Initiative.
Foiled in their attempt to gain mastery of the Black Sea, the Russian Federation is having to defend vessels that appear to be vulnerable to both aerial and sea drones. Accordingly, Russia is threatening to mine approaches to Ukrainian ports, according to British intelligence. The intent of the threat by Russia is to raise the insurance rates on vessels to deter exports from Ukraine, representing economic warfare.
The alternatives including barge transport of commodities westward along the Danube adds to cost. Shipment of grain on bulk carrier vessels through the Black Sea carries a cost of approximately $35 per ton under normal conditions. This can be compared to $120 per ton on the Danube route. It is estimated that shipments by barge since the termination of the Black Sea Agreement have attained 3 million metric tons with 1 million transported by rail.
Russia has threatened to attack merchant vessels but runs the risk of NATO involvement. According to the Montreux Convention, Turkey can restrict movement of naval vessels through the Bosporus. In the event of overt attacks on international vessels, Turkey, a member of NATO, may be obliged to allow passage of surface and undersea assets through the Dardanelles and the Bosporus into the Black Sea. Turkey is in an invidious position and is somewhat reliant on the Russian Federation for supplies of gas, concessions over Azerbaijan and bilateral trade.
Russia is continuing to export grain harvested from the occupied eastern provinces of Luhansk and Donetsk through ports on the Sea of Azov including Mariupol. Shipments pass under the Kerch Bridge joining Russia with occupied Crimea to the Black Sea. Exports from Russian ports on the Eastern coast of the Black Sea pass southward to the Bosphorus.
During the third quarter of 2023, Russia maintained exports amounting to 4.5 million metric tons, slightly more than the pre-invasion figure. In contrast, exports from Ukraine during the third quarter of 2021 amounted to 8 million metric tons.
It is evident that events between the belligerents in the Black Sea will influence international prices and availability of grain and oil seeds in coming months. This will have inevitable price repercussions for U.S. poultry producers.