From the Romanian shores of the Black Sea to the grain silos of the Ukrainian steppe, a great race is under way to find new export routes for millions of tonnes of wheat and corn now trapped by war.
If the farmers, traders, railways and port terminal operators can succeed, they will pour fresh export revenues into the coffers of a country fighting against a Russian invasion, while ensuring a critical stockpile of food reaches consumers instead of rotting in storage.
The stakes could scarcely be higher, with Ukrainians currently blocked from traditional export channels through shuttered domestic ports. Since the onset of hostilities two weeks ago, five cargo vessels have been struck by munitions. One sank.
“We are in a war,” said Nikolay Gorbachov, president of the Ukrainian Grain Association, and as a country, “we have to find a way to increase our revenues.” Ukraine’s storehouses contain roughly seven million exportable tonnes of wheat ZWK22 and 13 million tonnes of corn ZCK22.
Together, they are worth from US$6-billion to US$7 billion, a reservoir of value significant enough to alter the country’s financial outlook as it battles Russian tanks and warplanes. For Ukraine’s agricultural sector, there is no higher priority than finding ways to bring the wheat and corn to market.
“Of course it’s possible,” Mr. Gorbachov told The Globe and Mail Wednesday.
But, he warned, the current detour options are slow – and Ukraine needs international support, including foreign backstopping of rail car insurance, to accelerate movement of those goods.
The prospect of Ukraine’s harvest being marooned by war has already caused a vertiginous surge in wheat prices, to record highs. Experts have warned that if the crops cannot leave the country, global food shortages are likely.
One of the world’s great breadbaskets, Ukraine exports 12 per cent of the world’s wheat and 17 per cent of its corn. It is the top producer of sunflower seeds and its black-earth fields yield large oilseed crops.
The war in Ukraine has done grave damage to the country’s infrastructure, with Russian missiles laying waste to airports and artillery shells destroying roads. What roads still exist are intersected by militarized checkpoints – and few companies want to send trucks across land borders already choked with refugees.
But the country’s rail system remains largely intact, with the exception of eastern Ukraine, where the Russian attacks have been the most violent. At least 80 per cent of current stores of Ukrainian agricultural goods lie in parts of the country that continue to have rail access, Mr. Gorbachov estimates.
The most serious obstacle to moving large quantities of goods lies in Ukraine’s rail gauge. Much of the country uses a Russian-standard gauge that is wider than that used in most of Europe. That means most of Ukraine’s rail cars cannot be used by its western neighbours. Any grain exports will need to be physically transferred from Ukrainian to European cars at the border, or the cars lifted off one set of wheel trucks and placed onto another. Both are time-consuming options.
When Ukraine’s sea ports were in normal operation, the country could export 200,000 tonnes of wheat a day. By rail, the best it is likely to attain through transloading operations at every one of its western border crossings – to Romania, Slovakia, Poland and Hungary – is “not more than 20,000 tonnes a day, altogether,” Mr. Gorbachov said.
More is possible, but not without time or foreign help. Ukraine does possess some European-gauge track, which could be used to move additional volumes of wheat and corn. For now, however, European companies have refused to send rail cars into Ukraine, citing an inability to secure insurance for equipment sent into a war zone.
It will take government backing to secure insurance for those cars, Mr. Gorbachov said. More transloading capacity can also be built, although that will take months.
Other obstacles, however, have already been cleared. The Ukrainian government this week said it would require licences for the export of wheat, corn and sunflower oil. But it has told the agricultural industry it will issue licences to applicants within 24 hours. The industry, meanwhile, has agreed to receive Ukrainian goods without additional phytosanitary certificates, removing another potential barrier.
Outside Ukraine, meanwhile, industrial traders and port operators say they are prepared to help. With Odesa no longer moving goods, the nearest major Black Sea port that continues to operate normally lies 300 kilometres away in Romania, in the historic city of Constanta.
Companies in Ukraine have already been calling Constanta port operators asking if they have capacity to handle loads of iron ore, pig iron, steel plates and other raw materials.
Taking Ukrainian agricultural goods on a detour through Romania might be more expensive. But relative to the surge in wheat prices over the past week, the increased cost of “transport will be peanuts,” said Mihai Anitei, chief executive of Chimpex, a Constanta-based grain terminal and trading company.
Another operator at the port, Comvex, boasts Europe’s fastest grain terminal – a sophisticated new facility completed in 2020 – along with a mineral handling terminal that can accept the biggest ships sailing the Black Sea and Comvex president, Viorel Panait, who is keen to help.
“We have a large port here, with a lot of capacity,” said Mr. Panait, who is also president of the Constanta Port Business Association.
He has begun probing ways to move Ukrainian goods through Constanta and sees “enormous potential for the Ukrainians to generate revenue necessary to support such a crazy war.” The Romanian government is also involved. Its Agriculture Minister met this week with Mr. Anitei to discuss the movement of goods from Ukraine. European governments, Mr. Anitei said, need to work together to ease taxes to allow Ukrainian goods easier passage.
But some executives in Constanta wonder about the consequences of helping Ukraine. If Romanian companies offer economic succour “could that be considered by Russia an act of war?” asked Dorinel Cazacu, managing director of SOCEP, a large Constanta port operator.
In Ukraine, however, entrepreneurial companies have already found the door to open to new export routes. When Alexandra Aleeva called Ukrainian Railways to ask if she could still move feldspar from her company’s mine near Polonne in west-central Ukraine, the state rail company was supportive.
“They were very ready to give me [train] wagons,” said Ms. Aleeva, who works in the raw materials department of Ceramic Group Golden Tile. The company sells to ceramic tile makers in Spain and Italy, who have committed to keep buying – so long as Ms. Aleeva can find a way to get them feldspar.
She thinks has found a solution. She has booked the rail cars for March 12, and intends to ship 30,000 or more tonnes to the Romanian border, where it will be transloaded and sent to Constanta, one of the ports she used before the war.
It’s not a risk-free endeavour. A single artillery strike on a rail line could render the shipment impossible. “I realize it can stop at any moment. I cannot promise or guarantee anything,” Ms. Aleeva said.
But trying to keep exports flowing “is one of the most important things we can do,” she said. Not only does it mean the potential for new revenues, but “we have a big company and we have a lot of people,” she said.
“I hope very much that even in this incredibly difficult situation, we will still manage to allow people to keep their jobs.”
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