Weaponised logistics bottlenecks and blockades could precipitate widespread food shortages in countries in Asia and Africa, if food cannot be transported from Ukrainian silos, according to logistics experts in the country.
Alexander Khromov, project manager at Informall, said: “The unblocking of Ukrainian seaports is vital, not only for Ukraine, which is obvious, but for other countries. Of course, Ukraine has its own reserves of crops and, for the time being, a food crisis is not expected in the country, but life in countries dependent on crops imported from Ukraine may face dramatic changes.”
Moreover, Daniil Melnychenko, a data analyst at Informall, told The Loadstar Russia could use the rising price of food to stoke unrest in countries where supplies are scarce and incomes are low.
“The shortage of food may even cause another mass migration from the African continent and/or the Middle East,” he added.
Mr Melnychenko believes that if a food crisis is to be averted in these potentially risky regions, it is critical that, “wheat exporters [around the world] tap into their wheat reserves to cool down the market, putting slack into the global supply. No doubt, it will take time and effort for recipient countries to rearrange their supply chains and place orders with new sources outside of the Black Sea region”.
According to Informall, the blockade of the ports and the attacks on rail and road infrastructure pose a “serious threat to world food security”.
“The Russian army regularly destroys fuel storage facilities and oil refinery plants, escalating the problem of fuel for the logistics and agri-industries in Ukraine. While Ukrainian trucking companies are struggling to find diesel fuel, farmers are short on fuel for farm equipment and vehicles,” said Mr Melnychenko.
Ukraine’s Ministry of Economy said exports fell to one-tenth of pre-war levels in March-April, leading to a monthly shortfall of $1.5bn in export earnings.
According to the UN, Ukraine was the world’s sixth-largest exporter of wheat in 2021, with a 10% share of the global market, shipping 20m tonnes of wheat and meslin (a mixture of wheat and rye)> The country is also one of the world’s top exporters of barley, sunflower seeds, corn and vegetable oil.
About 16% of world exports of corn, 24m tonnes, and about 55% of global trade in sunflower oil, 5.1m tonnes, were produced by Ukrainian farmers last year.
Failure to export crops from the war-torn country, depending on the type of grain and the destination, will increase international food prices by up to 25% from levels already sharply elevated due to the Covid-19 crisis.
Moreover, this year at least 30% of the fertile area in Ukraine has not been sown, due to the war, with forecast crop volumes significantly lower, so that even if ports reopened during the harvest, the volumes of Ukrainian grain available for export would be substantially diminished.
Informall surveyed major agri-industry stakeholders who concluded that Ukraine was likely to face a reduction in the grain harvest this year to approximately 56m tonnes, the lowest in the past 10 years, and a decrease of 34% on the record figures of last year.
Meanwhile, the fuel situation is worsening as logistics issues mount, with fuel now being imported from the EU via complex overland routes. Historically, Russia and Belarus supplied fuel to Ukraine via a common railway system. Since the invasion, however, importers had to look for alternatives in the EU, which does not have the same railtrack gauge, causing major delays at borders.
This means that the only way to move cargo by rail is via five gauge-swap stations, located alongside Ukraine’s borders with Poland, Hungary and Slovakia. Currently, Ukrainian Railways (Ukrzaliznytsya) operates around 1,700 European-type gauge carts at the gauge-swap stations for Ukrainian railway wagons/platforms heading towards the EU seaports.
This is fairly limited capacity, considering that, as of 4 May, more than 30,000 rail wagons lined up at the western borders towards the EU. The waiting time ranges from 14 to 35 days before a rail wagon crosses the border.
Importantly, the average cost of the transport component of rail and/or road transport of grain, before loading on a vessel, adds up to 40% to the price of exported agricultural products, depending on crop and route.
Attacks on critical infrastructure in Ukraine is also an impediment to exports, but the target of these attacks may also be Asian and African nations that rely on those exports.
What is more, a prolonged war could mean Ukrainian crops for the 2023 harvest are never planted, prolonging the disruption and introducing another level of potential hazard for world markets.
Mr Vesselovski argued: “Although the Russian war on Ukraine has already caused a ripple effect on production, holding [down] prices for wheat for a year and unblocking Ukrainian seaports is a crucial step in order to stabilise world food market prices at least at the existing level, and preventing the chaos in countries that cannot withstand the shocks of war.”
Source: The Loadstar