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Ukraine’s grain exports, crop still must prove themselves -Braun

The volume of grain Ukraine will have available for export over the coming year and whether those shipments can run smoothly remains to be seen, though optimism has increased with the first sea departure of a grain vessel since Russia’s invasion.

Estimates across the industry still vary on harvest potential, but there are suggestions, including from Kyiv, that the grain crop could be larger than previously thought.

A ship carrying about 26,000 tonnes of Ukrainian corn left the Black Sea port of Odesa Monday headed for Lebanon following the export agreement signed on July 22. The U.N.- and Turkey-facilitated deal aims to safely restart Ukraine’s seaports, shuttered since late February.

Some details are still unclear, raising questions about the longevity of the program, which is renewable following the initial 120-day period. The issue of grain ownership is a top factor that could potentially jeopardize cooperation.

Ukraine has already accused Russia of stealing its grain on several occasions since the conflict began, most recently opening an inquiry into a ship docked last week in Lebanon with allegedly illicit cargo. That vessel was cleared for departure by Lebanese officials on Wednesday.

Russian forces occupy crop-heavy portions of southern Ukraine, but now that the new harvest is coming in, it remains to be seen whether Russia assumes ownership of any grain threshed or stored in those areas.

Grain exports contribute greatly to Ukraine’s economy, so this could quickly become a sore spot for Kyiv if more theft is suspected. Ukraine’s infrastructure minister said on Monday that at least $1 billion in foreign exchange revenue is at stake with the unlocking of ports.

Ukraine says it has 17 more vessels ready to go that were loaded pre-invasion, though it is unclear if the cargos were safely stored for the last five months, protected from the elements.

It is also unknown whether any other grain stored at the ports or in other locations across the country has been compromised, but in theory, there should be a large buildup of corn stocks in particular due to the loss of exports in the peak window.

Almost all Ukraine’s agricultural exports typically depart from Black Sea ports, hence the urgency to resume operations.

TRADE VOLUMES
Turkey said on Wednesday that three ships may leave Ukrainian ports daily instead of the one per day previously suggested, which greatly increases export potential depending on cargo size.

Monday’s shipment of 26,000 tonnes is mid-size, as some vessels may sail loaded with 60,000 tonnes or more. The ship allegedly stolen last week carried 10,000 tonnes of flour and barley.

Two days with no departures have already passed in August, but if three shipments per day of 26,000 tonnes left in a 31-day month, that would amount to 2.4 million tonnes. That compares with the 1.7 million tonnes reportedly shipped in July via other routes.

Before the war, Ukraine could export as much as 6 million tonnes of grain per month. U.N. officials last month said 5 million tonnes could eventually be achieved under this deal, though it was expected that full implementation would take a few weeks.

Successful passage of the first ship may help spur additional shipments as well as encourage Ukrainian farmers to press on with planting their 2023 grain crop. The sowing efforts should start up in a matter of weeks.

PRODUCTION POTENTIAL
Ukraine’s prime minister said on Wednesday that the 2022 grain harvest could reach 65 million-67 million tonnes versus 60 million expected previously, though this is not inconsistent with prior ideas from Kyiv. Reasoning for the boost was either not reported or not offered.

The PM had said back on April 8 that the grain harvest will fall 20% from last year, which was a record 86 million tonnes, implying output near 69 million tonnes. By June, government officials had still suggested possible production near 65 million tonnes.
Others have had less optimistic outlooks since the invasion, including some below 40 million tonnes early on. Most of those estimates have come up since then, but the targets still differ.

A harvest of 65 million tonnes would not be bad at all under the circumstances. That was the size of the 2020 harvest, which was marred by poor weather. Ukrainian estimates place the 2019 crop at 75.1 million tonnes, record at the time, and 2018 around 70 million.

Last month’s pegs from the U.S. Department of Agriculture are relatively pessimistic on harvest prospects with corn, wheat and barley production at 50.2 million tonnes versus 85 million last year. That would be the smallest combined crop in a decade.
Source: Reuters (Editing by Matthew Lewis)

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