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Global Economy

How about the grain deliveries

Following the grain agreement between Moscow and Kyiv, the United Nations expect exports from Ukraine across the Black Sea to increase. Several ships are currently awaiting permission to sail towards Ukrainian ports, said yesterday the UN Coordinator for Exports Frederick Kenney. It can be attributed to a "major upward trend in applications for transit". In July, Ukraine and Russia signed agreements with Turkey and the United Nations to export agricultural products and fertilizers from three Ukrainian Black Sea ports.

How much grain has been shipped so far?

According to official information, since the beginning of August around a dozen ships have been allowed to leave the ports of Chornomorsk, Odessa and Pivdennyj with more than 370,000 tons of cargo. Agricultural products were shipped – but so far mainly corn, which is usually used as animal feed or to produce ethanol as a biofuel. Smaller quantities of soybeans, sunflower oil and sunflower flour were also exported.

Wheat has not yet been shipped. This is partly due to the timing of the Russian invasion, as much of last year's wheat crop was exported as early as February. Wheat is harvested a few months before corn and is therefore usually shipped earlier. An estimated three million tons of grain are stored in the ports, which must first be transshipped, which will probably take until around mid-September.

where are the ships

The "Razoni" was the first freighter to leave the Ukrainian port of Odessa for Lebanon on Monday last week with around 26,000 tons of corn. Actually, the ship should have docked in the Lebanese port of Tripoli last Sunday. However, the Lebanese buyer canceled the order. The Ukrainian embassy in Lebanon said the reason was the five-month delay in delivery. A new buyer should be found. Most recently, the "Razoni" was anchored off the Mediterranean city of Mersin in southern Turkey.

The "Ocean Lion" is the largest ship to leave Ukraine since the beginning of the month. The freighter sailed on Tuesday and anchored in the Sea of Marmara not far from the southern end of the Bosphorus. Also nearby are the "Sacura" and the "Mustafa Necati". Another freighter, the "Rahmi Yagci", was last on the northern side of the Bosphorus. According to the Turkish Defense Ministry, the scheduled departure of a grain freighter from the Ukrainian port of Chornomorsk today had to be postponed due to bad weather.

Are there any problems with the transports?

According to UN coordinator Kenney, there have been no incidents that endangered the safety of ships. There were also no abnormalities during the searches of the ships. Part of the grain agreement are inspections of ships in Turkey. Their purpose is to ensure that no arms are brought into Ukraine or that goods other than grain are exported. Cooperation between the representatives of Russia and Ukraine is constructive, said Kenney: "I was very impressed by the level of cooperation and coordination that was shown."

Will the deliveries defuse the food crisis?

The aim of the grain agreement is to alleviate global food shortages. Ukraine's customers include some of the world's poorest countries, such as Eritrea in Africa. However, much larger quantities still have to be shipped in order to significantly improve global supply. In Ukraine, around 20 million tons of grain from last year's harvest are still stacked up, as well as this year's wheat harvest, which is estimated at another 20 million tons. The three ports involved in the agreement, Odessa, Chornomorsk and Pivdennyi, have a combined shipping capacity of around three million tons per month. Some experts believe that this level of exports could be reached in October.

However, it takes a large number of ships to transport such a large amount of grain. Some shipowners may be reluctant to go to a war zone, particularly given the danger posed by mines and the high cost of insurance.

Can the deal dampen food prices?

Russia's invasion of Ukraine and sharp drop in grain shipments from Ukraine have made food prices much more expensive as both grain and energy prices have risen. Higher fuel prices drive up the costs of farming, transporting, processing and packaging food. The corona pandemic and climate shocks have also contributed to food price inflation.

If the export plan for the grain deliveries is successful, a fall in the world market prices for grain and oilseeds is generally expected. However, supply remains tight and Ukraine's harvest this year will be smaller than last year as the war has also affected agriculture. The World Food Program has warned that food prices will remain high even if the deal is honored.

How big is the risk from sea mines?

Russia and Ukraine have accused each other of laying sea mines in the Black Sea. These pose a significant threat to ship crews. However, it is believed that the mines have now drifted away from the Ukrainian coast. Diving teams from the Romanian, Bulgarian and Turkish military are defusing mines in their waters. It could take months to clear them.

Can the transports be insured at all?

The Istanbul-based Joint Coordination Center, which oversees the deal and is made up of Turkish, Russian, Ukrainian and UN officials, released a case earlier in the week on the ship shipments to allay concerns from insurers and shipowners. Insurers had previously demanded clear rules for international escort trips by the navy and how to deal with sea mines.

Meanwhile, the insurer Ascot, a subsidiary of the British Lloyd's group, and the broker Marsh have set up sea freight and war insurance for grain and foodstuffs leaving Ukrainian Black Sea ports – with coverage of $50 million for each voyage. However, the costs of insuring the ships for the shipping companies are high.

Are there enough sailors?

It is also considered difficult to find enough seamen for the crews of the ships that are supposed to transport grain from Ukraine. At the beginning of the war, around 2,000 seafarers from all over the world were stuck in Ukrainian ports; today there are almost 450.

Are there other ways of transporting the grain?

Ukraine can transport up to two million tons of grain a month by truck and rail – about half of the four million tons the country shipped through its seaports before the Russian attack. That is why the sea route is of enormous importance. The deal with Russia will bring relief to developing countries "on the brink of bankruptcy and the most vulnerable people on the brink of starvation," said United Nations Secretary-General Antonio Guterres.

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