ANALYSIS: Ukraine's 2022/23 grain exports surpass last year, despite war

Grain exports from Ukraine exceeded last year's indicators, despite trade disruptions from Russia’s invasion of the country, an update from the Ministry of Agrarian Policy based on data from the State Customs Service has said.

As of June 30, the end of the marketing year, the export of grain and legumes from Ukraine amounted to 48.9 million mt, which is 1.3% more than in the same period last year, but analysis of the data shows the shift away from grains and towards oilseeds.

That included 16.8 million mt of wheat, down 10% versus the 2021/22 marketing year, with 2.7 million mt of barley, 53% down, while corn reached 29.1 million mt, up 24.5%.

Rye exports slumped to just 18,000 mt, 89% less than the previous marketing year.

Production volumes for all major grains dropped in 2022/23 due to military activities and forecasts in production for the new 2023/24 marketing year have maintained the same trend, as Ukrainian farmers are employing mitigation strategies to stay afloat during the crisis.

Along with the reduction in production, exports are also expected to decrease, although the scale of that potential decline will depend directly on the actual situation with logistics, as it remains the core issue for shipping grains out of the country.

According to the forecasts of the Ministry of Agriculture, the grain harvest in Ukraine in 2023 is expected to be around 46 million mt - some 5-7% less than last year.

Exports in the 2022/2023 marketing year were below the pre-war level and remained at the level of the previous marketing year, although the potential to export came more against the background of large ending stocks accumulated in 2021/22 amid the blockade of Ukrainian deep water ports.

Comparing figures for 2022/23 with 2021/22 they are close, with the figures for 2022/23 proving to be just 2% higher, but the country has the capacity and the stocks to export more.

BSGI’s (dis)functionality

The Black Sea Grain Initiative (BSGI) remained the major factor that both facilitated and slowed grain exports out of the country through the 2022/23 marketing year, with agricultural export capacity varying between three and six million mt.

But it the occasional lack of functionality through the BSGI that has delivered such uncertainty, with the lower end of the figure reflecting a scenario where the grain corridor is closed and the upper end reflecting the corridor operating at maximum capacity. 

Due to Russia’s obstruction of the Black Sea Grain Initiative, both the number of vessels and export volumes for major grains in June slid for the third month in a row.

Maritime shipping is the most cost-effective way to move agricultural commodities out of Ukraine, thus the inability of the BSGI to function freely resulted in a slower rate of exports for 2022/23 and, most importantly, lower farm-gate prices for Ukrainian farmers making them less sustainable in the long-term perspective.

From June 26 to July 2, 2023, 275,700 mt of agricultural products were exported through the sea ports of Odesa region, 23% less than a week earlier.

The number of ships that were loaded during this week remained constant at 6 units, but the vessels have not yet passed the necessary outbound inspections to continue moving past Istanbul and on to customers.

"The number of ships that have passed inspection at the entrance is decreasing," a representative of the Ukrainian agribusiness club said this week in an interview with .

"There were only four vessels last week. At the same time, the harvest has begun in Ukraine, and in the near future the need for trouble-free export of agricultural products from Ukraine will increase significantly," the representative said, describing the current pace of the grain corridor as "unacceptably low."

Alternative route through the EU

Import bans from neighboring EU Member States, initiated by Poland has been another issue that has impacted 2022/23 exports from Ukraine to EU via Solidarity Lanes.

Even though, the route is significantly inferior in terms of volume even versus an imperfectly functioning grain corridor.

The situation culminated in the introduction of an exceptional but temporary preventative measures imposed on limited Ukrainian imports by the EU through to September 15, 2023.

According to the available trade data for all agricultural commodities, the average export volumes to all of Ukraine's neighboring countries (Romania, Poland, Hungary, Moldova, and Slovakia) were around 3 million mt, dropping to around 2.6 million mt in April 2023 before subsequently rebounding back to the normal rate by May 2023.

Currently, the EU is working on strengthening Ukraine’s ability to ship its commodities by associating Ukraine to the Connecting Europe Facility program.

This development is unlikely to have a short-term impact - including in the 2023/24 - on Ukraine’s ability to expand its export capacity to the EU, but it would allow the country to boost exports in the medium- and long-term.