Ukraine Successfully Shipped Some Grain Out This Week, But Could Now Face a Bigger Challenge

Less than a week after the first shipment of grain left Ukraine destined for Lebanon, three more ships departed Friday. AP reports the ships are bound for Ireland, the United Kingdom and Turkey. Market watchers are still waving the red flag about not only how much grain will get shipped from Ukraine, but if the vessels will safely return.

The shipments are part of a paper deal between Ukraine and Russia, which was brokered by Turkey late last month. The start of shipments out of Ukraine's ports are promising, but grain exporters are still navigating murky waters with uncertainty and caution.

“They can only ship during the daylight hours,” says Dan Basse of AgResource Company. “It's going to be process, and I think the tangles in the process are going to be the key, by that I'm saying things are not going to work normally and you'll find some commercials that are not willing to staff because they do not want to put their people in harm's way.”

Bigger Question is if Ships Are Able to Return

The risks are extremely high for Ukrainian exporters, even with the agreement in place. Some analysts say the bigger hurdle may be the trip back home. 

“It's one thing to get these boats out, it's quite something else to have in return,” says Peter Meyer of S&P Global Commodity Insights. “We will get excited about Ukrainian exports when these boats return for another trip out. I mean, insurance rates are 200 times what they were before the incursion.”

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Meyer says since the vessels were loaded months ago, there’s also a question of the quality of grain currently in the vessels.

“For all intensive purposes, some of them could have concrete in them, I mean that tongue-in-cheek, but for us, it's really going to be watching whether these boats come back,” Meyer adds.

No Incentive for Ukrainian Farmers to Plant 

USDA could make revisions in its upcoming World Supply and Demand Estimates (WASDE), which will be released next week. Basse says AgResource’s view is USDA’s estimates don’t need to shift too much, but there’s a larger issue for farmers and grain users than even the export situation in Ukraine.

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“The real problem is this Ukrainian farmers are getting such low prices for their wheat and corn bids right now. I don't find any of our clients that are looking at planting anything substantial for wheat, or winter rapeseed, heading into the late August and September timeframe,” Basse adds. “So to me, it's a story that's ongoing with maybe more bullishness now centered towards 2023, because Ukrainian grain farmers just don't have the capital to plant the crop that they have ahead.

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