Ukraine’s biggest crop exporter cast doubt on prospects for the country’s grain shipments, even as is shares soared – and wheat futures plunged – on hopes of a deal between Kiev and Moscow to reopen the country’s Black Sea ports.
Kernel Holding revealed that its grain exports from Ukraine had slumped by 93% to 123,115 tonnes in the April-to-June quarter, from 1.97m tonnes a year before, thanks to the “blockade” on exports from Ukraine’s Black Sea ports following Russia’s.
And, while the group acknowledged the “emerging perspectives of the lifting of the blockade of seaports” – with Kiev and Moscow expected later on Friday to sign a deal freeing-up grain exports – it raised doubts about the efficacy of the agreement.
“There is a limited visibility on when it can happen, how long it may take to renew the export operations via the Black Sea ports of Ukraine, and what could be the associated costs,” Kernel said, while underlined the importance of the resumption of Black Sea shipments for its own finances.
“In case export via Black Sea ports is not resumed in the nearest future, additional negotiations” may be required with Kernel’s creditors, who have thus far waived principal payments on bank loans up to the end of September.
‘No meaningful alternatives’
Indeed, Kernel stressed the difficulty of exporting grain via alternative routes, such as by rail and road, and via Ukrainian ports on the river Danube, terming such operations “very challenging”.
The group listed as obstacles “numerous bottlenecks” on roads, “discriminatory railway regulations in Ukraine”, a shortfall in space on Danube barges, and competition for capacity with crops from new harvests in eastern EU countries, besides noting demurrage charges prompted by delays.
“After several months of operations in [the] new environment, there are substantial risks that there could be no meaningful options to establish efficient alternative export channels compared to blocked deep-water ports.”
Kernel reported 5.71m tonnes of grain exports in the July-to-December period of 2021, the last financial period before Russia’s invasion, which it reported as equivalent to a market share of 15%, ahead of rival trader Nibulon on 9%, and Cargill, Louis Dreyfus and Cofco on 8% apiece.
Kernel also revealed that thanks to the port blockades it failed to register any transhipment volumes in the April-to-June period, compared with 1.85m tonnes a year before.
And the group – the world’s top sunflower oil producer, with 7% of world output – said that the volume of oilseeds it processed in the quarter slumped by 75% year on year, to 156,622 tonnes, after the war prompted it to shut its nine crushing plants.
Four of the plants reopened during the quarter.
Edible oil sales plunged by 78% to 60,821 tonnes, “mainly caused by the export volumes collapse due to the seaports blockade”.
Kernel Holding shares, which are listed in Warsaw, close up 7.4% to 28.56 zloty despite the weaker results, amid hopes for a deal to allow the exports from Ukraine’s ports, of which Odesa alone holds a reported 20m tonnes in stockpiled grain. The headway took to 44% in 10 days the surge in Kernel shares on hopes for the resumption of Ukraine’s maritime grain exports.
Also in Warsaw, shares in eastern Ukrainian farm operators Agroton gained 12.6% to end at 3.94 zloty while KSG Agro closed up 6.2% at 2.675 zloty.
In Paris, shares in Ukraine farm operator AgroGeneration, which last month revealed it had lost nearly half its land to the war, soared 42% at one point on Friday before easing back to end at E0.118, up 22% on the day.
However, wheat futures tumbled on international markets, on prospects for increased supplies of the grain from Ukraine.
In Chicago, soft red winter wheat, the world benchmark, stood 5.4% lower at $7.63 a bushel in late deals, hitting its lowest levels in five months.
Paris soft milling wheat for December ended 6.1% down at E312.50 a tonne, a four-month closing low. London feed wheat for November plunged by 6.2% to £255.25 a tonne, its weakest finish in three months.