News From Ukraine: How are other countries replacing Ukrainian grain?
We want to take the time to check in on farmers in Ukraine. We are starting to see more grain shipments leaving the Black Sea ports, but other nations still have to adjust. So, how are they replacing Ukrainian grain?
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The American port of Charleston is located more than 6,000 miles away from the Egyptian city of Alexandria. Six months ago, it was impossible to imagine that grain could be shipped over such wide distances, but the current war in Ukraine made this a reality for some countries. North Africa and the Middle East have traditionally imported Ukrainian wheat.
We decided to analyze how buyers are replacing Ukrainian grain. Egypt is the world’s largest grain importer, where 25 percent of the total volume was supplied by Ukraine. Now, the country is trying to find alternatives to prevent food shortages. In July, French, German, and Romanian grain export volumes to this country increased. Grain was also imported from Russia, although at first the country was denied access to a tender. Negotiations are now underway for supplies from Argentina.
We spoke to Mr. Bohdan Kostetskyi, a partner at a trade and analytical company called Barva Invest. He is also a consultant in the discussions on food trade between Ukraine and Africa.
“African consumers like to cover out of the Western hemisphere, which comes in July, August. So by the time phases of Russian war came to Ukraine in February, the coverage was quite sufficient. Furthermore, as you know, Northern African countries are harvesting their own crop and in some cases, discovered in 43-50 percent of their needs. So they are trying to buy hand to mouth. Speaking of the tonnage coming out of Ukraine, which is approximately 5 million tons of wheat and 5 million tons of corn, we think that replacing origins would be Russia and the EU. Due to freight advantages, Russia would be covering countries like Egypt, and the neighboring countries. The European origin would come to Morocco,” said Kostetskyi.
He thinks that through open grain corridors, Ukraine now has the potential to export 110 million bushels per month.
“But without the port of Mykolaiv, coming back into a full-swing operation, which is really tough to expect right now as we have a lot of destruction in the port and the front-line of the war is nearby this area. I think that the term of recovery for Ukrainian shipments to pre-war levels would be measured in years, most likely,” Kostetskyi said.
In cases where there is no way to rearrange imports of wheat, countries attempt to substitute it in their consumption patterns. Some poor African countries are switching to rice or corn flour as a result. What about corn? Before the war, Ukraine was one of the key exporters of corn to China. In 2020 and 2021, 290 million bushels of corn were shipped there from Ukraine. This made up 30 percent of China’s corn imports. The U.S. shipped the other 70 percent. In search of an alternative, China is negotiating agreements with Brazil, although previously, disputes over phytosanitary certificates prevented the country from importing corn from Brazil. In total, however, China cut its corn imports by 11 percent in the first half of 2022.
How difficult will it be for Ukraine to regain its position? We asked an American expert, the founder, and partner of the brokerage company, Sunstone Brokers, Mr. Jonathan Grange.
“Ukraine will easily win back positions because the price will ultimately solve any issues,” said Grange.
He notes that forced flows introduce consumers to supplies as they would previously not have considered.
The U.S. Russian grain embargo in 1979 did much short-term damage to U.S. sales and woke the world and the Russians up to alternatives such as South America and France. The U.S. never regained its full market share, but that was more risk management by the Russians than purely price.