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8:21 AM Friday, December 15, 2017
Agriculture
​Ukraine: A Grain Goliath Tied Down by Railroad?
Farm leaders say: between modern silos and modern ports stands the state rail monopoly
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KYIV -- Ukraine will nearly double its grain exports over the next five years, hitting 70 million tons of grain in 2022, predicts Mykola Gorbachov, president of the Ukrainian Grain Association.

“Since 2010, Ukraine has grown over 20 million tons of corn per year, and we have not even reached 50 percent of our potential yield,” Gorbachov told the Ukrainian Agribusiness Forum Tuesday.

Ukraine’s overall grain yields are in the process of doubling over a 20-year span, from two tons per hectare in 2002 to a projected four tons per hectare in 2022. This growth mainly stems from adoption of international best practices as large agro holdings – the companies that rent farmland from owners – have invested in new equipment and techniques.

But Ukraine’s agriculture industry faces a big logistical challenge: moving grain from farm gates to Black Sea ports.

Mykola Gorbachov, president of the Ukrainian Grain Association, sees Ukraine on the path to becoming a world food power. (James Brooke)

Railroad Holds Up Harvests

The bottleneck is the state railroad.

“Inland logistics present the biggest problem for us,” said Martin Schuldt, Ukraine general manager of Cargill, the U.S. agricultural conglomerate.

Schuldt blamed delays on a lack of rail cars and locomotives. Ukrzaliznytsia, the state rail monopoly, has highly inefficient in providing freight transport, causing some traders to fail to meet contracts last year. Traders accuse local rail line managers of creating delays in order to ‘solve’ them through extra payments.

“The logistical problems mean we assume production higher costs, and the farmers are paid lower rates as a result,” explained Schuldt. He called on “the Infrastructure Minister and the railway to ensure that the grain is moved from the silos.”

Agreement came from Volodymyr Osadchuk, Ukraine general manager of COFCO Agri, a China-based trading company.

He charged Ukrainian Railways is moving too slowly to buy new locomotives.

“There are not enough,” Osadchuk said. “Farmers do not feel it, because they have already sold their crops. But it directly results in higher costs for us, and lower wages for them.”

Martin Schuldt, Ukraine general manager of Cargill, worries that Ukraine's harvests are growing faster that the nation's capacity to move them to the Black Sea ports (James Brooke)

River Alternative is Years Away

Looking ahead to bigger harvests and, ideally, better transportation, agribusiness leaders want to increase grain handling capacities of Ukraine’s Black Sea ports. Today, the ports can handle roughly twice the amount of grain per day as the railway.

River transport, Europe’s alternative to rail, is years away from being revived in Ukraine. Today, the EU moves 50 percent of commodities by water, 10 times Ukraine’s portion of 5 percent.

With the world’s population expected to expand by 100 million people a year through 2030, Ukraine increasingly will be valued as a world food power.

“The world needs, and will continue to need, Ukrainian grain,” Schuldt concluded. “But we need to be able to move it.”

For comments and story ideas, please contact UBJ Correspondent Mark Satter at marksatter@theubj.com

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