Horizons #86 – Where is Ukraine’s grain going?

02 February, 2023

by Professor Ross Kingwell, AEGIC Chief Economist

Huge disruption to Ukraine’s grain flows and altered trading patterns are challenging Ukrainian grain producers and grain traders.

We may think we have it tough in Australia, coping with floods, damage to roads and having problems with grain logistics. But spare a thought for Ukrainian grain producers who have experienced theft of their stored grain, missile damage to their port, road and rail systems and for some, an inability to return to their fields due to unexploded ordinances, shell holes and proximity of the conflict. For many farmers their logistics costs have doubled or trebled in 2022/23 compared to pre-war cost (Figure 1).

Figure 1: Ukrainian grain farmers’ logistics cost increases since pre-war. Data source: Antonina Broyaka, Kansas State University

Not only have Ukrainian farmers and grain traders had to cope with production difficulties but they’ve had to establish or cope with new trade patterns. As shown in Figures 2 and 3, exports of wheat and barley have been curtailed in 2022/23 due to production and logistics difficulties. More grain is heading west through Ukraine into Romania and Poland. China has hugely reduced its purchases of Ukrainian barley, and instead is now purchasing Russian barley. Turkey is one of the few nearby countries that has remained an outlet for Ukrainian grain. Egypt and Indonesia who are the world’s top two importers of wheat and who normally would look to import wheat from Ukraine are now forced to look elsewhere.

Figure 2: Wheat export patterns for Ukraine in 2021/22 and 2022/23. Data source: Antonina Broyaka, Kansas State University

Figure 3: Barley export patterns for Ukraine in 2021/22 and 2022/23. Data source: Antonina Broyaka, Kansas State University

Australia has been a beneficiary of the reduced ability of Ukraine to affordably export large volumes of wheat and barley. The longer the war continues and the greater the damage to long-lived grain supply chain infrastructure in Ukraine the more likely it is that Australian grain producers and exporters will continue in an unintended way to benefit from the reduced supply of Ukrainian grain.

Banner image: Mariupol. Ukraine. (YuriyMaltsev/Shutterstock.com)

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Horizons: the AEGIC Economics and Market Insights blog

Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.

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