Ukraine boosts grain exports despite intensifying Russian attacks By Reuters

By Pavel Polityuk, Jonathan Saul and Tom Balmforth

KYIV/LONDON (Reuters) – Ukraine is scrambling to ship as much grain as possible this summer, using military gains it has made in the Black Sea region to boost exports even as Russia has attacked its ports.

Ukraine is a major world producer of wheat and corn, and before Russia’s 2022 invasion, the country was only exporting about 6 million tons of grain per month via the Black Sea.

Grain sales are a key source of income and while global prices are weak, cash-strapped Ukrainian farmers have no choice but to continue with exports as they need to finance the next winter sowing season.

Ukraine doubled its food exports in July to more than 4.2 million metric tons compared to the same month last year, according to data from Ukraine’s UGA traders’ union, despite intensifying Russian attacks on Odesa, a key export hub to the Sea Neagra, and Izmail, a major port along the Danube river carrying grain to Europe.

Ukraine has not yet reported the destinations of its exports in July, but last season it exported most of its wheat to Spain, Egypt and Indonesia, with its corn going mostly to Spain and China.

The increase comes despite a drop in production this season caused by war-related disruption and there is no guarantee that Kiev can maintain the trend throughout the 2024/25 season.

“We are doing everything to make business comfortable even in wartime conditions,” Dmytro Barinov, deputy head of the Port Authority of Ukraine, told Reuters.

Exports are a combination of new-season wheat and corn from stocks after last year’s bumper crop.

So far, Ukraine has exported 3.7 million tonnes of agricultural goods in July through Odessa and 569,000 tonnes through the Danube, export data showed. This compared to 291,000 tonnes via Odessa and 2.07 million tonnes via the Danube in July 2023.

There were six shipments of corn from Ukraine’s other two operational Black Sea ports, Chornomorsk and Pivdennyi, in June and July to Rotterdam, Europe’s busiest port, and Cartagena in Spain, separate LSEG shipping data showed.

Since July, Ukraine has also shipped cargoes to China, Egypt and Turkey, separate data from Kpler showed.

Despite stronger sales last month, total exports for the 2024/25 season are expected to fall due to bad weather and the impact of the war, agricultural consultancy ASAP said.

“We expect Ukraine’s grain exports to decline by 14.5 million tonnes per year and reach a near-decade low of 35 million tonnes,” ASAP said.

TARGET PORTS

Ukraine managed to create a shipping corridor after a UN-backed Black Sea grain export initiative collapsed last year. Russia’s Black Sea Fleet has been forced to move almost all of its combat-ready warships from occupied Crimea to other locations.

While the improved security situation has reduced insurance and shipping rates, making exports more competitive, Kiev’s challenge is to ensure that its ports, which are accessible, can ship goods.

Ukraine has sustained several rocket and drone attacks in recent weeks, some of which targeted Odesa and Izmail.

Even though the ships have so far avoided any major damage, Ukrainian officials say port infrastructure is being targeted.

“The Russians are aware of this and they are hitting the weak points,” said Barinov of the Port Authority of Ukraine.

“They strike with precision missiles, they deliberately destroy our ability to export, to process.”

Barinov and other shipping officials said Russia was avoiding strikes on international shipping lanes outside Ukrainian port limits, keeping the escalation under control.

Ukraine’s military assists ships entering and leaving ports, captains operating in accordance with specific safety instructions, Vice Admiral Oleksiy Neizhpapa told Reuters.

“The Ukrainian Air Defense Forces cover these corridors and ports. All assets, from air defense groups to missile systems along the coast, are contributing to this effort,” Neizhpapa said.

However, Ukraine faces a host of other difficulties, including power outages that disrupt port operations and exports.

Munro Anderson, head of maritime war risk operations and insurance specialist Vessel Protect, part of Pen Underwriting, said Russian strikes on targets inside Ukraine, although less frequent than at the start of the war, continued to put pressure on Kiev.

“Such attacks persist in exerting pressure on Ukraine’s commercial maritime environment and thus achieve Russia’s intention to erode Ukraine’s ability to fully exploit the potential production of these ports.”

Additional war risk premiums for ships calling at Ukrainian ports have been quoted in recent months at up to 1.2 percent of the ship’s value with discounts that could mean a lower rate, insurance sources said. Those premiums rose to as much as 3 percent in November after a missile damaged a ship in Pivdennyi.

That still adds up to hundreds of thousands of dollars in estimated additional costs for a seven-day trip, and those costs could rise if security conditions deteriorate.

Industry sources said war underwriters were reviewing the situation in light of the recent attacks.

“Increased vessel occupancy in corridor ports may prompt reinsurers to review their war risk insurance rates,” said Maksym Dubovyi, managing partner of insurance broker Atria.

During its year of operation, Ukraine’s maritime corridor allowed 2,059 ships to deliver 57.7 million tons of goods to 46 countries, including 39 million tons of agricultural products, said Neil Roberts, head of the maritime department and aviation at Lloyd’s Market Association, which represents the interests of all underwriting companies in the Lloyd’s of London insurance market.

“Individual insurers will decide the rate as appropriate in the light of events and take their own view of the risk.”