News From Ukraine: How freight costs are affecting shipments; what safe routes are being taken
We want to take the time to check in on farmers in Ukraine. We are learning more about recent shipments - the routes they are taking and what exactly is included based on corridors they can safely travel.
Latifundist Media has partnered with us to provide boots-on-the-ground coverage:
Turkish trader, Onur Vatan, has lived in Ukraine for the last 18 years. He runs the trading department of a company called Sintez group, the largest producer of milled peas in Ukraine. After February 24th, he was searching for different ways to export this crop by barges along the Danu in containers and even by truck from Odesa to the Turkish port of Tekirdag, 1,000 kilometers away. He got the chance to export product via the grain corridor from Ukrainian seaports.
“The very first vessel was loaded and it contained yellow peas and milled yellow peas under the UN program for further delivery to African countries,” said Vatan.
But since transport lengths with Ukraine are closed, Onur had to choose this path.
“We had to ship from Ukraine to Turkey, and from there, to Africa. To do this, we purchased products from farmers who grew niche products, and we will be able to provide the products to people in need located in Africa under the UN program,” Vatan said.
A month has passed since the unblocking of three Ukrainian ports and the establishment of a safe corridor for maritime transport was signed. During this time, 33 ships and more than 630,000 tons of grain left the ports in convoys. Currently, there are about 40 applications for call at Ukrainian ports.
“The cost of freight and insurance are the hardest stumbling blocks in this direction. Although the rates are still very high, they have decreased slightly since the corridor is in place and working,” said Vatan.
Kronos Bulkers DMCC Director, Gennadiy Ivanov says, “Of course, the insurance is a major part of the freight and today is 1.25-1.50 percent of insurance rates per vessel, but it is good news that it is 1.5 percent because upon this agreement has been signed in Istanbul, we could hear from the writers, the rates, the expectation of about 3.5 percent.”
If safety of the corridor is maintained and formal procedures are eased, more and more ship owners will work in the corridor and the rates will be lowered.
“And we can expect that the future of market participants could see that the situation has mitigated; commodities loaded are safe and smooth. We can expect that more and more owners will consider Ukraine and that the freight rates could be decreased,” said Gennadiy.
What was the agreement upon the reopening of the seaports on the domestic market? The first thing is that it gave the opportunity to export in larger volumes. The positive side is the increase of grain prices on the domestic market. During the last month, it rose from $96 per 37 bushels to $120.
Moreover, as the Minister of Agrarian Policy and Food, Mykola Solskyi announced in early August, the cost of freight by Danu fell by 10-20 percent, and by the end of the month, it may fall by 30-40 percent.
“The cost of logistics by alternative routes is also falling. Last year, the cost of logistics by rail and motor transport was around $7 per ton, and since the beginning of the war, it was up to $100 per ton,” said Solsyki.
The Minister considers logistic alternatives to be equal to the cost of the Black Sea ports.
“Operating ports, grain corridors, export of Ukrainian commodities. This is not just about fighting hunger, but also about ensuring that the agrarian economy of Ukraine is not completely destroyed,” Solskyi said.