Black Sea Grain Exports Plummet as Attacks Shut Key Ports
Attacks on shipping have shut down more than 97 per cent of Russia and Ukraine's grain export capacity in the Azov and Black Sea basin, cutting off a major source of low-cost supplies and helping to drive up global prices, according to reports from The Canberra Times and The Economic Times. The two major grain exporters have intensified attacks on ports and shipping over the past month, leaving importers in the Middle East, Africa and Asia facing the prospect of sourcing grain from higher-cost suppliers such as Australia and the United States.
Russia and Ukraine together exported an average of 7.2 million metric tonnes of grain a month from terminals in the Azov and Black Sea region last season, according to Reuters calculations based on official data and analyst estimates, as cited in The Canberra Times. There are no shipments from Ukraine's Black Sea terminals. In Russia, the only grain terminal not officially shut is a small facility in Tuapse with a capacity of about 160,000 tonnes per month, officials and trade sources say. Ukraine is exporting grain through rail links with Eastern Europe and Danube river ports. The shutdowns represent a loss of more than 97 per cent of grain export capacity compared with last season, Reuters calculations show.
"At present, civilian shipping in the Black Sea has virtually ground to a halt," said Yevgeny Karabanov, head of the analytical committee of the Grain Union of Kazakhstan, which also ships grain through Russian ports, as quoted in The Canberra Times. Global wheat prices have risen about 6.5 per cent this month and are now roughly 30 per cent higher than a year ago. While large stockpiles and stronger harvests have allowed importers to delay purchases, traders say pressure is mounting to secure supplies because there are no signs of de-escalation.
Ukraine's Proposed Truce Rejected
Ukraine offered Russia a truce on attacks against ships carrying agricultural commodities through the Black Sea, but Moscow rejected the deal because it wanted guarantees against strikes on its energy infrastructure, Ukrainian President Volodymyr Zelenskyy said, as reported by The Economic Times. "It looks like their position is that they will not attack our grain corridor only if we stop attacking their energy sector," Zelenskyy said Saturday at his office. He also ruled out holding wartime elections, an idea advocated last week by the popular former Defense Minister Mykhailo Fedorov. "If we want to tear the country apart, then we can move toward elections in the middle of a war like this," the president said, describing it as a "tsunami" for Ukraine. Ukraine's constitution doesn't permit elections under martial law, which was introduced in response to Russia's full-scale invasion in February 2022. It last held presidential and parliamentary elections in 2019.
Impact on Grain Trade
Russia and Ukraine have stepped up attacks on each other's commercial ships and ports in the Black Sea area, raising fears about the impact on grain supplies to world markets. The two countries account for over a quarter of global wheat exports, and the attacks come in the middle of this year's harvest. Ports in Ukraine's Greater Odesa region handle about 90% of its grain shipments. The country has exported only about 500,000 tons of grain since the start of August, or about a fifth of its potential shipments, Agriculture Minister Taras Vysotskyi said on Thursday, as cited in The Economic Times. The Agriculture Ministry is mulling alternative routes for exports.
Ukrainian seaports in the Odesa port hub effectively ceased operations at the end of July; as of mid-August, no new ship calls had been recorded, according to The Economic Times. Ukraine is exporting grain via rail (45%), Danube (45%), and road (10%), as reported by The Canberra Times. Vysotskyi said Ukraine could reach 50 per cent of export potential if ports remain blocked, according to The Canberra Times.
Damage to Russian Terminals
Earlier this month, three of Russia's largest grain terminals in the Black Sea port of Novorossiysk halted operations after sustaining damage, as reported by The Economic Times. Major Russian grain terminals in Novorossiysk, including NZT and NKHP, were shut after a Ukrainian drone strike, according to trade sources cited in The Canberra Times. KSK, Russia's largest grain terminal, suspended operations, and the Taman grain terminal was also halted, according to The Economic Times. Several grain carriers loading or preparing to load at Russian ports were hit by drones this week, as reported by The Canberra Times.
Analysts at Rusagrotrans estimate Russia's August wheat exports at 1.8 million tonnes, the lowest level for the month since 2010, according to The Canberra Times. Russia can redirect some exports through Baltic, Caspian and Far Eastern ports, but longer transport distances from these ports will create logistical challenges and increase costs, as reported by The Canberra Times.