Ukrainian millers and food security in wartime

Source

APK-Inform

15835

The evil that came to Ukraine dramatically changed the normal course of life. In these difficult conditions, the flour milling industry of Ukraine proved its full potential. All enterprises that are not located in the temporarily occupied regions worked better and more productively than ever before. Not immediately, of course, not in February 2022, but starting from March, all mills were fully loaded to cover current needs and to create a strategic reserve of flour, which the country did not have.

Official statistics postponed providing data on flour production. However, we can see the dynamics basing on the data provided by millers (table).

Largest flour producers in Ukraine

 

Company

Flour production volumes, tonnes

2022

2021

2020

1

Vinnitsia Bread Product Plant No2 (Roshen)

116764

125729

138823

2

Dnipromlyn

95867

33467

100071

3

Roma

93992

71857

68068

4

Stolychny Mlyn

83230

74847

90752

5

Novopokrovka Bread Product Plant (Novaagro, Novatorg)

54260

61186

62929

6

Rivne-Boroshno

33975

29497

30677

7

Pererobnyk

33150

6645

25045

8

Zernary Trade House

32153

57002

43172

9

Zaporizhzhya Mlyn

27850

30479

30919

10

Kulindorivsky Bread Product Plant

21500

20572

26303

 

Produced by TOP-10per year, tonnes

592741

511282

616759

There is no Khmelnitsk Mill in the table. It usually was among TOP-3 largest producers of flour in Ukraine. Obviously, they managed to produce sizable volumes in 2022, however, the company refused to provide any data.

Other mills showed significant increase in flour production. Even those mills that usually do not perform well or were shutdown for a long time were reopened.

After the start of full-scale Russia’s invasion, the export of flour was virtually absent in March and April. It totaled 1.5 thsd tonnes over 2 months. Ports were blocked, transit routes via Romania were unknown, the EU market was closed by duties and quotas. However, Ukrainian millers did not stop, especially when the market of Europe was opened for Ukrainian flour and transit routes became clear. Moreover, supplies to Moldova were not hurt. Gradually, starting with 1.4 thsd tonnes in May, the export exceeded last year’s volumes in IV quarter of 2022. It amounted to 13.5-16.8 thsd tonnes over this period that was quite good and gave hope.

Large mills continued exporting, as well as small companies increased shipments significantly. Many new players came to the market.

Despite the fact that the result of 2022 was the smallest in last 9 years, it is still impressive taking into account the conditions of the war. Moreover, 83.6% of the overall volume was shipped in the second half of 2022 or the first half of 2022/23 MY that means that the result matched the figures of last years and even has clear trend for improvement of export by the end of the season.

During the IIQ, we were looking for logistical possibilities, trial shipments, etc. The decision of the EU to open European markets to Ukrainian products, to eliminate quotas and duties was one of the main factors. After this, the development of the European market was faster and resulted in global changes in Ukrainian wheat flour export geography.

Temporary blockage of Ukrainian ports due to Russia’s full-scale military aggression forced Ukrainian flour millers to look for new routes to the world market. Millers could use road and rail transport to deliver to a consumer or to the nearest foreign port. But the transportation costs increased significantly. As a result, the cheapest way was to transport flour to the countries bordering with Ukraine. First, to the port, where it was transshipped into containers. After the removal of trade restrictions for Ukraine by the European Union, flour was shipped for sale within the EU.

Most of Ukrainian flour was shipped to Moldova in 2022, as the logistics did not change. The volumes of flour exported to Moldova did not differ much from the shipments of recent years and were even somewhat higher. At the same time, the supply to Poland can be called a real breakthrough. Poland produces an average of 3.7 mln tonnes of flour per year and by no means suffers from a shortage of this product. But the price/quality ratio helped to sell almost 10 thsd tonnes of Ukrainian flour to Poland. And all these for the last 3 months, when 7`600 tonnes were exported. I suppose, that in 2023 we will be pleasantly surprised by the volumes settling in the union country. In addition to Poland, quite a lot was shipped both to bordering European countries - Romania, Hungary and Slovakia, and to more distant ones: Croatia, Lithuania – 1`676 tonnes; the Czech Republic – 1`043 tonnes; Germany – 1`020 tonnes; Bulgaria – 726 tonnes. And also to Latvia, Georgia, Sweden, Cyprus, Albania, the Netherlands, Spain, Greece, North Macedonia, Slovenia and Belgium. In short, they were shipped to almost all of Europe.

Of course, the situation in the country affected the prices and, foremost, the prices of the raw material, which was impossible to export. It was unethical to say, but this situation suited the flour millers. Otherwise, it would have been complicated to purchase grain for processing and to ensure the country’s food security. Our people are patriotic, but some (I believe so!) would rather sell the crops to exporters at higher prices, than think of possible famine in the country.

As it was impossible to export via Ukrainian ports since February 24, automobile transport became the main transportation means of product delivery to consumers or ports in Romania. Total auto transport delivery volumes reached 45 476 tonnes, out of which by containers – 4523 tonnes. Another 7062 tonnes were transported by railways with 13496 tonnes by wagons. Also, 12697 tonnes were shipped by cargo. It is understandable that the share of products transported by land was later loaded onto sea ships.

The war in Ukraine and the threat of famine in some countries, which appeared because of this, led to drastically railing prices for food. This included prices for wheat flour. In Ukraine due to the absence of the possibility to export sea the prices for grain declined and caused the prices for flour to go down as well. During the first stage of export by land, this allowed to keep enterprises, which unloaded the product many kilometers away from the borders, to keep running. After the “grain corridor” was established and the tension on the global market was removed, the global prices for wheat declined slightly, whereas in Ukraine – they increased. All these could have halted the export, which luckily, did not happen. If we summarize the cost of road, rail, and sea transport, the total cost of delivery increased dramatically, which led to a loss of profit. But there was no other way. There were many exporters from the western part of Ukraine, the logistical routes from other parts of Ukraine had already been worked out, and exports began to grow in the second half of the year. It increased especially in the last three months when the average price of products decreased, and it continues actively this year.

Mostly, the “giants” of previous years are the most active, stability is an indicator of mastery. Due to occupation, there is no “Pivdenmlyn”, instead there are new participants in the market. And both from the far southwest - Uzhhorod “Vlad”, and from the far northeast - Shostkin “Newsphera”. This only supports our optimism and hope for the future.

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