Inland Grain Logistics in Ukraine

29.05.2018

Inland Grain Logistics in Ukraine.

 

In-depth analysis of grain and oilseed logistics and considers crop delivery by truck, rail, river and sea.

 


“Inland Grain Logistics in Ukraine” UkrAgroConsult  study  

Updated May. 29, 2018

 

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The study “Inland Grain Logistics in Ukraine” provides an in-depth analysis of grain and oilseed logistics and considers crop delivery by truck, rail, river and sea. 

It presents general trends and development prospects of grain and oilseed production in Ukraine, analyzes the foreign trade in the context of grain exports.

 


 


 

Key points and issues covered in the study:

  • Key trends in the grain and oilseed market. Crop pattern, yields, production trends. Domestic consumption and foreign trade.
  • Key export destinations. Ukraine’s share in global grain and oilseed exports. Sales geography.
  • Inland storage system. Adequacy with regional grain production volumes and elevator locations. Biggest elevator owners.
  • Trucking: place in the grain trade logistics chain. Problems and prospects of the development, description of trucking.
  • Railway transport. Description of rail grain transportation, delivery destinations and volumes. Availability and state of hoppers.
  • Rail freight rates, their components and dynamics
  • Reasons for interest in developing river cargo transportation. River waterways and key terminals, technical condition and capabilities.
  • General descriptions of Ukraine’s river ports. Specialized grain storage capacities in river ports.
  • Development trends in Ukraine’s port handling sector. Dynamics of handling tariffs in Ukraine’s ports, 2009-2017. Estimated theoretical capacities of bulk grain handling in the sea ports.

     

Most important subjects in the latest update:

“Silos and Terminals of Ukraine” Main page study. UkrAgroConsult

 

Upward trend in grain yields

The growth and stabilization of grain production in Ukraine in 2013-2017 was a consequence of significant investment in the agricultural sector during 2008-2013. Ukraine saw a rise in capital expenditures for advanced technologies in 2010- 2016. This trend is confirmed by a considerable increase in imports of seed, plant protection products, machinery and equipment. The recovery of investment after 2014 contributed to the stabilization of yields and exports in both 2015 and 2016. Further gain in yields can be achieved primarily at the expense of better growing practices. In particular, these include using better seed, plant protection products, machinery and applying higher rates of mineral fertilizers as required agronomically.

Source: State Statistics Service

Upward trend in oilseed production

The main oilseeds cultivated in our country are sunseed, rapeseed, and soybeans. Their combined planted area in Ukraine has been gradually expanding in recent years, with a steady increase in their production. It gained 48% in 2011-2016, from 13 MMT to 20 MMT. The largest crop was harvested in 2016, mostly due to a hike in sunseed yield. Owing to factors such as steadily growing sown areas and average yields, the Ukrainian sunseed crop reached 14.4 MMT in 2016.


 

Development prospects of the grain and oilseed market

Ukraine has significant potential for further expansion of grain and oilseed production. The country has almost doubled grain production over the past decade, from an average 30.1 MMT in the early 2000’s to 62.3 MMT in 2014-2016. The surge in yields was made possible due to improvement of growing practices, upgraded machinery, better quality of seed and plant protection products, and a larger share of fertilized areas. Since oilseeds are more profitable to grow than conventional grain crops, oilseed plantings are expected to expand in the coming years. At the same time, the upward trend in yields suggests that oilseed production will likely rise.
 

Grain export peculiarities

The range of Ukrainian grain export destinations is quite wide, numbering over 100 countries. The main end markets include North Africa and the Near East. However, exporters have been stepping up wheat shipments to Asia and Sub-Saharan Africa in recent seasons. The top buyer of Ukrainian barley is Saudi Arabia. Its interest in coarse grains will remain relatively stable in the near future – this is to support exports from Ukraine. In the long term, the demand for Ukrainian grain will be pushed up by global population growth and rising incomes in developing countries, which are the biggest consumers of Black Sea grain.

Wheat export destinations

(Source: State Statistics Service of Ukraine)

 

Grain trucking

The role of trucking in grain delivery to ports increased in 2012-2015 because of high grain export potential, inadequate management of rail transport, and growth in rail freight rates. When upgrading ports and building new terminals, a lot of attention was paid to the upgrade and expansion of truck unloading facilities. In particular, new private ports allocated significant areas for trucks and modern unloading equipment. The main drawback of delivering grain by trucks is the problem of its cleaning, because the material is usually directly transshipped from trucks into the ship. In most cases, such grain needs cleaning and conditioning, but only port elevators can do this.

Dry goods exports by truck, MY 2016/17

Destination

KMT

Poland

196

Moldova

39

Hungary

27

Romania

14

Belarus

11

Russia

6

n/a

61

Total

354

Rail transportation

Railway is the main channel of delivering export grain to Ukraine’s sea ports. In 2016, export grain shipments by rail totaled 90.8%, while domestic shipments accounted for 8.1%. Rail grain transportation follows a pronounced seasonal pattern. In the first months of the crop season, a significant portion of produce is delivered to ports by trucks. Then rail transport takes over the key role in bringing grain to export terminals on the Black Sea coast. In winter, the share of rail transport in grain shipments to Ukraine’s ports reaches 90-95%. The average monthly total of grain loadings by rail exceeded 3 MMT in MY 2016/17 – it even hit a high of 3.7 MMT in March 2017.

 

 

River transportation of grain

In present, Ukraine has quite high freight potential for transporting grain along its inland waterways. Moreover, the agricultural sector has the most developed infrastructure for river transportation of grain compared to other economy sectors. Consequently, it drives the development of river logistics as a whole. Our country has well-developed river infrastructure for grain handling. The key peculiarity of loading infrastructure is that is has two types of facilities: river ports and terminals with vessel loading units. The river grain handling segment is represented by 22 infrastructure facilities with a combined capacity of almost 8.0 MMT. Based on the present-day trends and prospects of agricultural production, further active development of this transport segment can be predicted.

Ukraine. Estimated river grain handling capacities, 2016

 

Type of infrastructure facility

Total

River port

River terminals

Handling capacity, MMT/ year

2.2

5.5

7.7

Storage capacity

125.0

1.0

1.2

Source: UkrAgroConsult

 

Sea transportation of grain

Grain is handled by 14 out of Ukraine’s 18 ports: Chornomorsk (former Illichivsk), Odesa, Mykolaiv, Yuzhny, Kherson, Izmail, Berdyansk, Mariupol, Bilhorod-Dnistrovsky, Reni, Kerch, Ust-Dunaisk, Skadovsk, Feodosia, and Sevastopol. The location of these ports and their proximity to strategically important markets (the Near East, North Africa, Europe) enhance their competitiveness several-fold. As of November 1, 2017, theoretical grain-handling capacities of Ukraine’s sea ports totaled 54.55 MMT, excluding the Crimean ports and terminals.
 

Development prospects of grain export logistics

Ukraine currently produces some 84 MMT of grains and oilseeds. At the same time, agricultural exports total roughly 52 MMT. The export focus of the Ukrainian agricultural sector’s development drives the intensive construction of new transshipment facilities both in the deep-water and small ports on the Black and Azov Seas.

Owing to the implementation of new projects and the upgrade of existing terminals, combined theoretical handling capacity of the Ukrainian ports, excluding Crimea’s ports, reached 52.55 MMT in 2017. At the same time, the overall utilization ratio of the terminals exceeded 90%.

As of today, investment in the logistics sector is focused mostly on the construction and upgrade of port terminals. However, to secure normal operation of terminals, investors will soon be forced to put money into access infrastructure upgrades and demand the government to take similar measures.


 

Relevance of the subject:

This study is aimed at disclosing the dynamics and development prospects of the national grain and oilseed market, as well as deeply analyzing the peculiarities of grain transportation by different modes (by road, by rail, by river, and by sea).

Ukraine saw growth of investment in advanced technologies in 2010-2016. This trend is confirmed by a considerable increase in imports of seed, plant protection products, machinery and equipment.

The recovery of investment after 2014 contributed to the stabilization of yields and exports in both 2015 and 2016. Total grain outputs in Ukraine have changed considerably over the last 30 years. The main reason is weather adversities. However, the same observations indicate that the weather factor gradually becomes less influential owing to the use of drought- and frost-resistant varieties, expanding irrigation systems, and moisture-conserving practices in grain cultivation.

With regard to oilseeds (sunseed, rapeseed, soybeans), the greatest growth is predicted in the soybean segment. The demand for Ukrainian soybeans and rapeseed is propped up by the fact that the country often offers non-GM products. The EU and other markets are expected to strengthen their demand for non-GM soybeans.

Wheat exports to Asian and African countries have expanded dramatically over the past decade, primarily because they increased demand for milling wheat of medium quality. In addition, the development of exports to these destinations, especially to South-East Asia, was promoted by a freight rate decline resulting from the global crisis.

Motor transport is a key segment of transport infrastructure, particularly in the domestic market. So, for instance, trucks have no alternative when it comes to delivering grain from the field to elevators. At the same time, grain trucking is unpractical when it comes to long distances (over 200 km), because the delivery cost per 1 MT of grain increases considerably in this case.

The largest portion of goods in Ukraine are transported by rail. The country has one of the most extensive railway networks in Europe, almost all of Ukraine’s sea ports are linked to railways, helping realize its export potential. Grain shipments by rail are significant, but grain is not considered the main freight item, it cannot influence the whole rail transport system substantially. This is the more so as grain transportation follows seasonal trends.


 

Contents:

1. Grain and oilseed market

  • 1.1. General description
    Ukraine’s share in global wheat exports, 2017/18
    Ukraine’s share in global corn exports, 2017/18
  • 1.2. Key trends
  • 1.2.1. General trends in grain production in Ukraine
    Grain production
    Dependence of the grain crop on imported input supplies
    Corn yield
    Ratio between planted and fertilized areas
  • 1.2.2. General trends in oilseed production in Ukraine
    Ukraine: Oilseed crop
    Ukraine: Pattern of oilseed plantings
    Ukraine. Sunseed production (official data)
    Ukraine. Sunseed production (UkrAgroConsult’s estimate)
    Ukraine: Rapeseed plantings
    Ukraine: Rapeseed crop
    Ukraine. Rapeseed production
    Ukraine: Soybean plantings
    Ukraine: Soybean yield
    Ukraine: Soybean crop
    Ukraine. Soybean production
  • 1.2.3. Domestic grain consumption
    Population in Ukraine
    Compound feed production
    State of farm animal production in Ukraine, 2010 – 2017
  • 1.3. Development prospects of the grain and oilseed markets
    Grain production in Ukraine, KMT
    Grain exports from Ukraine, KMT
    Grain production forecast until 2032, KMT
    Grain export forecast until 2032, KMT
    Ukraine. Oilseed production, KMT
    Forecast for oilseed production until 2032, KMT
    Forecast for meal exports until 2032, КМТ

2. Foreign trade

  • 2.1. Key grain export trends
    Wheat export destinations, 2015/16, 2016/17
    Wheat export dynamics
    Ukraine. Wheat export dynamics, 2009 – 2017
    Ukraine. Barley export dynamics, 2009 – 2017
    Ukraine. Corn export dynamics, 2009 – 2017
    Ukraine. Corn export destinations, 2016/17
  • 2.2. Oilseed crushing and exports
    Ukraine: Sunseed exports
    Ukraine: Sunseed production and exports
    Ukraine’s share in global sunflower oil trade
    Ukraine: Sunflower oil production and exports
    Ukraine: Rapeseed exports
    Ukraine: Rapeseed production and exports
    Ukraine: Soybean exports
    Ukraine: Soybean production and exports
    Ukraine: Soybean exports geography, 2016/17
    Ukraine: Soybean oil exports
    Ukraine: Soybean oil production and exports
    Ukraine: Soybean meal/cake imports
    Ukraine: Soybean exports

3. Inland storage system. Adequacy with regional grain production volumes and elevator locations
Ratio between the crop and certified grain storage spaces by region, 2017
Top state owners of elevators
International elevator owners
Non-state elevator owners

 

4. Trucking

  • 4.1. Place in the grain trade logistics chain
  • 4.2. Description of grain trucking
  • 4.2.1. Key advantages of trucking
  • 4.2.2. Key geography and destinations
    Dry goods exports by trucks, MY 2016/17
  • 4.2.3 Truck fleet, availability of specialized machinery
    Technical characteristics of trucks
  • 4.3 Approximate delivery cost and its dependence on distance
    Ukraine. Distance and cost of grain delivery to ports by truck, 2017
    Diesel fuel price behavior, 2014 – 2017
    Cost of grain delivery by truck
  • 4.4 Problems and prospects of the trucking development

5. Rail transport

  • 5.1. Place in the grain trade logistics chain
    Ukraine. Structure of export grain deliveries, 2011 – 2017
    Map of Ukraine’s rail networks
    Ukraine. Shortage of port railway stations’ throughput, railcars per day
  • 5.2. Description of rail grain shipments
  • 5.2.1. Key destinations Основные направления и объемы перевозок
    Ukraine. Rail grain transportation, 2003 – 2017
    Ukraine. Share of grain in rail freight turnover, 2010 – 2017
    Rail loadings of grain
    Ukraine. Grain loading in railway divisions
    Ukraine. Grain loadings by rail, 2015 – 2017
  • 5.2.2. Export border checkpoints
    Grain goods exports by rail
    Description of border railway stations at export border checkpoints
  • 5.2.3. Availability and state of hoppers
    Ukraine. Operating fleet of railcars, 2012 – 2017
    Ukraine. Owners of grain hoppers
    Ukraine. Structure of the grain hopper fleet by age, 2017
    Ukraine. Dynamics of grain carrier checking, 2017 – 2020
    Average monthly supply of available grain railcars, units, 2016 – 2017
    Average turnaround of grain railcars
  • 5.3. Rail transportation cost
  • 5.3.1.  Rail freight rates and their components, dynamics
    Rail transportation costs
    Ukraine. Annual growth of rail freight rates, 2011 – 2017
  • 5.3.2. Calculated transportation costs for key destinations
    Rail freight rate for grain
  • 5.3.3. Impact of freight rates and delivery cost on grain delivery volumes and trading margins
    Ukraine. Ratio between grain delivery cost and volumes for railways
    Value-added chain on the example of corn
  • 5.4. Organization of shipments
  • 5.5. Private railcar fleet, purchase and leasing of hoppers
    Ukraine. Grain hopper owners, 2017
    Ukraine. Private fleet of grain hoppers, 2017
    Comparative characteristics of Ukrainian-made grain railcars
  • 5.6. Problems and prospects of the rail transport development
    Necessary number of grain carriers in case of a grain export increase

 

6. River shipping

  • 6.1. Place in the grain trade logistics chain of Ukraine. Grain deliveries to ports
  • 6.2. Reasons for the interest in developing river transport
    Ukraine. Estimated possibilities of river grain handling, 2017
  • 6.3. Description of river grain shipments
  • 6.3.1.  River waterways and key terminals, technical condition and capabilities
  • 6.3.2. General descriptions of Ukraine’s river ports. Specialized grain storage capacities in river ports
    Description of grain-handling river ports
  • 6.4. Description of river port terminals
  • 6.5. River terminals
    Ukraine. River terminals. Grain storage capacities of river terminals
    Ukraine. River silos and terminals, 2017
  • 6.6. Tug and barge facilities
  • 6.7. Problems and prospects of the river transport development

 

7. Sea ports

  • 7.1. Export infrastructure. Grain-handling capacities of Ukraine’s sea ports
    Ukraine. Sea ports
    Ukraine. Geographical location of main grain-handling ports
  • 7.2. Estimated theoretical grain-handling capacities in Ukraine’s sea ports
  • 7.3. Development trends in Ukraine’s grain-handling port sector
    Ukraine. Theoretical grain-handling capacities in ports, 2010 – 2017
    Ukraine. Share of ports in grain handling
    Grain handling in sea ports by month, 2014 – 2017
  • 7.4. Grain storage capacities in ports
    Ukraine. Estimated grain storage capacities in sea ports, 2017
  • 7.5. Dynamics of grain-handling rates in Ukraine’s ports, 2009 – 2017
    All-inclusive rate for grain handling in key ports, 2015 – 2017

 

8. Development prospects of grain export logistics
Grain delivery cost. Motor transport
Grain handling cost. Rail transport
Grain handling cost. River transport
Ukraine. Calculated potential of grain delivery by river transport, 2020.


 

Conclusion:

The export-oriented development of the national agricultural sector drives the intensive construction of new handling capacities both in deep-water and small ports on the Black and Azov Seas. Further advance in the handling sector is stimulated by a high utilization rate of grain terminals along with forecasts about further rise in agricultural exports.

The cargo traffic increase will add to the load on the system of inland transportation of grain and other farming commodities. Investment in the logistics sector is now focused mostly on the construction and upgrade of port terminals. However, in the not so distant future, investors will be forced to put money into approach infrastructure for securing normal operation of their terminals, and to demand the government to take similar measures.
 

 

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