Silvia Aloisi and Pavel Polityuk

LVIV Ukraine (Reuters) – Some 1,100 grain wagons are trapped near Poland’s main rail crossing. The wagons cannot transport their goods abroad.

They are just some of the 24,190 wagons carrying various goods for export, including vegetable oil, iron ore, metals, chemicals and coal, that were waiting to cross Ukraine’s Western border as of Tuesday, according to data from the state-run railway company that hasn’t previously been reported.

With war raging along the country’s southern coast, and its main ports blocked off by Russia’s invasion, Ukraine is struggling to export its grain and other goods, according to government officials and industry insiders. However, Kyiv is trying to find alternative routes for export by land as logistical problems and red tape hinder its efforts, according to industry insiders and commodity traders.

Valerii Takachov (deputy director, commercial, state-run railway company Ukrzaliznytsia) said that approximately half of all the wagons are awaiting their turn at the intersection near Izov. This junction is where the rail crossing from Poland to Poland crosses. The junction is located 130 km north of Lviv and serves as the gateway to Gdansk, the Polish maritime port.

Industry insiders claim that the problem lies in the huge volume of goods needed to be transported by other routes. According to the government, this is creating shortages of staff and rail cars. Ukraine, one of the world’s biggest grain exporters, had prior to the war exported 98% of its cereals via the Black Sea. Typically, only a fraction of the country’s exports went by rail, where transport costs are higher than shipping.

These difficulties are compounded with logistical problems, like differences in rail track gauges between Ukraine and Poland. This is a legacy of when Ukraine was part the Soviet Union. While most of the fighting has avoided the west, there were missile strikes on Lviv and oil facilities. Security around the border is also very tight.

The disruptions to Ukraine’s exports mean that countries that rely on imports of Ukrainian grain – including China, Egypt, Turkey and Indonesia – will need to find alternative supplies or face food shortages, aid agencies have warned.

Russia’s Feb. 24 invasion of Ukraine has heightened concerns about global food security, sending prices of global grain, fertilizer and fuel soaring. The disruption of harvesting and planting in many countries, as well as supply chain issues have caused global food prices to rise since mid 2020.

Even though Russia has reduced its activities in Kyiv, and the northern regions of Chernihiv, to focus more on east-central battles. However the continued blocking of the ports of the south continues to cause a serious problem for Ukraine. Grain exports are a cornerstone of Ukraine’s economy – totalling about $12.2 billion in 2021 and accounting for nearly a fifth of all the country’s exports, according to official data.

The Ukrainian government didn’t respond to a request for comment. The Ukraine claims that its grain exports fell by ten percent last month due to port closures. This disruption also impacts many people across the globe. “Hundreds of millions of people around the world will not receive food unless Russia’s blockade of Ukrainian ports is lifted in the near future,” the agriculture ministry said in an April 1 statement.

Russia has launched a special military operation in Ukraine to “denazify and demilitarize” Ukraine. Both the West and Ukraine claim the invasion was unlawful and not justified.

The Kremlin didn’t respond to a request for comment. Russia denies deliberately targeting civil infrastructure and civilians, in spite of documented attacks against hospitals, apartments buildings, and railways.

Ukrainian farmers who produced record-breaking wheat crops last year claim their wheat yields may be cut by as much as half. According to a U.S. official, Russian forces continue to damage grain storage facilities in the eastern Ukraine. Moscow and Kyiv accuse each other of setting up mines on the Black Sea to create dangers for merchant shipping.

The war has upended the country’s agriculture sector and “has destroyed Ukraine’s roads, railways, and rail stations that facilitate overland transportation,” a U.S. official told Reuters last week. “As Putin’s War continues, more and more arable Ukrainian land is ruined by Russian tanks, shells, and landmines—risking a much longer-term food crisis.”

Russia and Ukraine are both major exporters of wheat, accounting together for around a third world exports. Nearly all of this transits through the Black Sea. The Black Sea is shared with Turkey, Bulgaria, Georgia, Georgia, and Turkey.

BACKED UP

It could take some time to clear the backlog.

Tkachov explained that the Ukrainian rail network has a Russian gauge of approximately 1.5m, which is 10 cm more than European tracks. This means railway workers have to manually adjust the chassis for the Polish tracks. Alternately, the staff can load the Ukrainian grains into Polish wagons and then pour them in to the Polish tracks. This can take about half an hour per wagon.

Tkachov of the state railway said that 500 wagons are crossing the border at Izov every day – which is essentially a three week backlog. He added that there are another dozen crossing points, many of which aren’t backed up.

He said that the state railway was working hard to double its capacity, which will allow it to transport 1,100 grain wagons per day into Slovakia, Romania, Hungary, and Poland. This is almost a 10 fold increase over March’s level.

Tkachov says that the company is expanding its workforce and purchasing new equipment to assist with switching rails. It also plans to divert staff from passenger trains and cargo transport.

He said, “We’re working to speed things up… decreasing the duration and quantity of wagon inspections and the amount paperwork.”

HIT TO EXPORTS

Astarta Holding NV (a Ukraine-based food manufacturer) is one company that has been affected by the backlog. The company had agreed to deliver 25,000 metric tonnes of corn to European customers in April, but had yet to receive the required all-clear from railway authorities, according to Julia Bereshchenko, Astarta’s investor relations and business development director.

Astarta stated it also had 150,000 tonnes corn in silos. It stated that the tall storage buildings should almost be empty at this time of year.

According to official figures, the government released Sunday’s numbers. They reported that March saw exports of approximately 1.4 million tonnes wheat and corn. This was less than the 3 million tonnes exported in March 2021, and it is about 25% of February’s exports.

But the most recent month’s export volume includes grain loaded onto vessels stuck at blockaded Ukrainian seaports, deputy agriculture minister Taras Vysotskiy told Reuters.

Vysotskiy said Monday on Ukrainian national television that 300,000 tons of agricultural products were leaving the country via railroads.

An analyst has stated that Ukraine, having exported 43 millions tonnes of grain between the beginning of July and the invasion in February, may only be able to export about 1 million tonnes over the next three months due to logistical problems. The government had predicted that grain exports would reach 65 million tonnes in this season before the conflict.

Vysotskiy expressed optimism Monday that Ukraine could export 1.5 million tonnes per month via rail. He added that this would only be one third of the volumes normally handled at the ports, but still provide some income to the agricultural sector.

‘DROP IN THE OCEAN’

A source within the industry said that commodity traders such as Cargill Inc are trying to find ways out of this country, but it is not an easy task.

Cargill didn’t respond to requests for comment.

The agriculture ministry announced that Kyiv was in discussions with Romania to ship its agricultural commodities via Constanta’s Black Sea port. According to industry representatives, this could involve moving the grains via rail to Danube cargo ports. Then they would be loaded on barges and transported towards Constanta.

After arriving at the port in Romania, the grain would need to be transferred to larger vessels that can ship worldwide. The whole process is costly and complex. APK-Inform, an Ukrainian agricultural consultancy said that the price of shipping Ukrainian grain from Ukraine to Constanta cost between 120 and 150 euros (133 to $166 per tonne).

Prior to the war, grain transport to Ukraine’s Black Sea ports cost traders between $20 and $40 per ton.

The weekend saw further destruction of any hope of an immediate re-opening. Local officials stated that Russian missiles struck the port of Mykolaiv on Sunday and also hit oil facilities close to Odesa, a major Black Sea hub. Russia’s defense ministry stated that the missiles it used had damaged an oil refining plant and fuel storage sites near Odesa. They were used by Ukraine for fuel supply to its troops in Mykolaiv, it said.

According to the Ukraine’s government, it also worries about its food supply. However, it claims it has sufficient stocks to last three years.

Ukraine has introduced export licences in wheat and suspended all exports of rye. However, the government stated that it will allow exports free of sunflower oil and corn.

One of the major foreign commodity traders in the nation said that even though the country could increase its agricultural export capacity from 700,000 to 1 million tonnes per month and by rail, via the Danube, it would still only “drop in an ocean.”

“We could achieve 10-15% of the actual capacity,” he stated. I believe that the economic risks are enormous.”