Filenews 11 August 2022
By Chloe Sorvino
For six months, grain-filled ships have been stranded in Black Sea ports, also victims of Russia's unprovoked attack on Ukraine. Now, some of them have begun their journey, amid the dangers posed by the war zone, but with a burden that in some cases is considered of dubious quality.
"As long as a missile is launched there and something hits, then everything will stop," says John Rich, president of Ukrainian agricultural giant MHP, who continued his activity in the country unlike many of his competitors who abandoned it after the start of the war. "There is light at the end of the tunnel when it comes to the ports. But this tunnel could be closed in the blink of an eye. Just one move is enough and that's it. It's a big risk," he explains.
The first ships have already left Ukraine having set sail for destinations in the Middle East and Africa, where millions of people are struggling to cope with a worsening food crisis. There are now areas where the famine is exacerbated by the drought that has affected many countries. In East Africa, for example, it is possible that one person dies every 48 seconds from extreme hunger, according to an Oxfam report published in May.
These exports are therefore vital in the fight against hunger, but cereals may not provide the solution to the extent expected. With the outbreak of war in February, the crews abandoned their ships, many of which had not been in operation for six months. This means that many of them have not been ventilated as they should have been. It is therefore possible that a large part of the grain has become mouldy or has developed mycotoxins from the humidity of the open sea.
At the same time it is doubtful whether the ships will be able to reach their destinations. The first ship to leave the port of Odessa, the Sierra Leone Razoni-flagged one, is anchored in the Mediterranean Sea near Turkey, according to the Lebanese government. Rich, whose company normally processes 3 million tons of Ukrainian grain per year, says the ship was likely delayed due to a deterioration in grain quality and may have to resell its cargo. Usually, ships are unloaded within two weeks. However, this one was in the port of Odessa for months.
"The quality of the grain is dubious, from what it sounds like," Rich says.
Meanwhile, even the exit of ships from Ukrainian ports is an extremely difficult task. In addition to minefields, the southern part of Ukraine is largely an active war zone. Ukrainians have launched counterattacks in an attempt to recapture the port of Mariupol, among other areas. The troops, however, are being hit hard by Russia's artillery.
This is the other reason why MHP, which also breeds chickens and sunflower oil, is in no hurry to send tons of products to Odessa for export.
"As an entrepreneur, what can I do? To wait," Rich says. "As far as MHP is concerned, we don't want to lead the way in that. We will probably wait, storing our grain, until we see how the situation develops," he adds.
As for products leaving MHP warehouses, they are often directed to Europe by truck and train, through the western border of Ukraine. Demand from the richest European countries is strong, since drought and a number of other problems have resulted in the destruction of crops.
Most of the Ukrainian grain that Europe now receives was destined for countries in the Middle East and Africa, such as Egypt, where people find it difficult to buy sufficient grain. MHP has many more than 15-year contracts with Middle Eastern and African countries, which, according to Rich, the company has not been able to fulfil.
The exports of Ukraine and Russia account for 30% of world grain trade and almost 70% of sunflower oil. In 36 countries, they supply more than half of their grain needs. Also, before the start of the war, 98% of Ukrainian grain exports were transported through the Black Sea, which the Russian fleet has blockaded since February.
The reopening of the country's ports, even temporarily - given that the agreement reached through the mediation of the United Nations has a duration of 120 days -, is of great symbolic importance for the global food crisis, notes Abiola Afolayan, a former UN official who is now a senior advisor to international policy to fight hunger at Bread for the World.
This is a fragile situation, Afolayan says. "There is concern about the safe exit of grain," he adds and explains: "The big problem concerns the attacks on ships and the exit from the port of Odessa. But this is just one of the crucial parameters for resolving the global food crisis that we are facing. In no way should it be the only corridor."
Globally, the UN says that in recent years, the number of people "on their way to starvation" around the world has risen to 323 million from just 80 million previously, with 49 million people in 43 countries even facing the risk of famine.
The MHP is in its last two weeks of harvesting and expects to collect about half a million tons of grain in total. The new grain crop throughout Ukraine is now estimated at about 21 million tons, much of which will soon be ready for export. However, again, this year's crop is about 50% less than last year's.
It is also said that there are still about 25 million tons of grain that remain stuck in Ukraine's warehouses, from last year's harvest, which must be sold and exported soon, as otherwise they will also go to waste. Besides, the storage areas must be emptied in view of the winter harvest.
Another complication facing MHP and its competitors in trying to export their grain from Ukraine is related to commodity futures prices, which have returned to pre-war levels of $9/bushel, up from $14/bushel where they soared in May. This means that companies, such as MHP, are "compensated" for the additional risk they face.
As a result, MHP is less willing to take risks, according to Rich. At the same time, the question arises as to whether Russia could continue to target ships departing from Ukrainian ports in a "perverse" attempt to limit the global supply of grain so as to raise the price for Russian wheat exported. Such a trap is possible, rich says. He adds that this is another reason why he is planning, but hesitantly, the return of MHP to the port of Odessa. "They could drastically raise prices," he says. "That's why I'm very, very cautious."
The next two weeks, however, during which farmers complete the summer wheat harvest and more ships are expected to attempt the perilous journey of departure from Ukrainian ports, will be critical for the millions of people who rely on Ukraine's food exports.
"As long as the Black Sea ports become safer and safer for all of us, of course we will increase our exports as much as we can," rich says. "We have had customers in the Middle East and Africa for the last 15-plus years. We want to abide by our original agreements. But I don't know if we will be able to do so, given the problems in supply chains."
Source: Forbes
