Cautious optimism as the first grain ship leaves the Ukraine

The ongoing Russian blockade of Black Sea ports has sparked fears of a global food and economic crisis which is why all eyes were on the Razoni this week, the first vessel to leave the port of Odesa in Ukraine following the landmark deal brokered by the United Nations and Turkish officials to allow grain shipments to resume via the Black Sea.

By The Newsroom
Saturday, 6th August 2022, 9:39 am

Bound for Lebanon and reportedly carrying 26,000 tonnes of corn, the Razoni was inspected and cleared by officials in Turkey before continuing its onward journey.

The safe passage of the Razoni is both a relief and a welcome development in an increasingly fragile situation. Whilst it is hoped that the remaining vessels that are loaded and waiting to depart will be able to follow suit soon, the longer-term picture looks more uncertain.

With trust being an implicit cornerstone of the agreement, Russian actions have done little to build confidence given the attacks on Odesa less than 24 hours after the grain deal was done and the subsequent deadly missile strike on the home of the founder of a major Ukrainian grain export company, Nibulon.

An ocean liner on the open sea

Turkish officials have said that up to five ships per day could leave Ukrainian ports, but as yet no further vessels have set sail. Around 20 million tonnes of grain await export, which could rise to 75 million tonnes following this year’s harvest, according to Ukrainian President Volodymyr Zelensky.

There are also additional hurdles to overcome in terms of insurance costs, and the willingness of freight operators to take the risk of sending vessels into the Black Sea to collect loads, as well as being able to secure crew for the journey.

As such, it is a very uncertain picture which ultimately hinges on whether the safe passage agreement holds. It is therefore unlikely to have a significant impact on the local market, which continues to look to alternative sources for raw materials.

Elsewhere, weather remains a key watchpoint with the ongoing hot and dry conditions in Europe causing concern, particularly for the corn crop which is forecast to be down by 10-12 million tonnes.

Spiralling energy prices are also adding to the burden of input costs for both feed and fertiliser.

Gas prices are around six times higher than the same period last year amidst growing concern that Russia will provoke an energy crisis in Europe after it suspended gas deliveries to several EU countries because of their refusal to pay in roubles as well as reducing flows to the Nord Stream 1 pipeline to around 20% of capacity. As such, EU member states are being urged to save gas to build up stores for the winter, prompting rationing concerns for industry.

Fertiliser manufacture is an energy intensive process which risks further curtailments in production if prices continue to rise. BASF have already stated that they are considering further cuts to ammonia production in their German operations due to the price of gas, which will restrict supplies to the market.

The Russian invasion has driven up the cost of all fertiliser raw materials due to the more limited availability of product and thus need to source from further afield, which has also resulted in longer lead times.

Fortunately, grass growing conditions this year have been exceptional and have been able to compensate for any risks taken on reduced nutrient applications. However, as our increasingly changeable weather patterns demonstrate, the same growing conditions cannot be guaranteed for next year and thus the same gamble may not pay off next time.

Now is an opportune time for forward planning for next year. As ever, maximising the nutrient use efficiency of fertiliser is key to maximising yield and quality as well as being more cost-effective. This requires routine soil testing to ensure nutrient decisions are based on accurate information.

Through the Soil Nutrient Health Scheme, DAERA are offering to provide farmers with detailed information on the nutrient status of their soils and those farmers in Zone 1, which covers the South East, are encouraged to register online by the deadline of 31st August 2022. DAERA have confirmed that individual farm data collected will not be used for enforcement purposes but participating in the scheme will be a requirement for receiving future farm support.