Ukrainian grain flows are pushing down global prices as the newly opened crop-export corridor shows initial success. 

More than 500,000 tons of foodstuffs aboard 21 ships was exported from the country’s major Black Sea ports in the first half of August, under a deal agreed late last month. That’s far from a normal pace, but is providing some relief to grain supplies strained by Russia’s invasion and bad weather curbing harvests elsewhere.

A stream of fresh vessels are arriving, signaling cargoes will continue to flow. A key challenge is whether larger vessels normally commonplace in Ukraine’s ports are willing to transit the corridor and boost flows, even as Moscow continues its wider assault. 

“Ukraine unlocked grain which was blocked in silos all over the country, and it will push the market down,” Elena Neroba, an analyst at brokerage Maxigrain, said by phone. “The main obstacle is to assure shipowners that this corridor is safe and they can use it without extra payment.”

The Ukraine crop-export corridor covers Odesa and two other key ports, while hubs such as Mykolayiv remain shut. The agreement was brokered by Turkey and the United Nations. Ukrainian President Volodymyr Zelenskiy is due to meet Thursday with his Turkish counterpart and the UN secretary-general in Lviv. The UN official will also visit Odesa.

Seaborne grains trade from Ukraine remains far from pre-war levels, when 5 to 6 million tons could depart ports monthly. Its wheat exports this season are running at a third of last year’s pace, and total grain shipments are down by about half. 

Still, prospects for an acceleration in flows are weighing on grain prices and Thursday’s visit from the UN is expected to paint a “first reassuring picture” despite the limited pace, said Paris-based adviser Agritel. Ukraine also continues to ship crops via alternative land and river routes established during the war.

Chicago wheat futures fell 2.3% on Thursday to $7.6275 a bushel, erasing this year’s gain. The contract in Paris dropped 3.2%, paring its 2022 advance to about 10% versus nearly 60% as of mid-May. 

The first seaborne cargoes to flow were vessels stuck since the invasion in February, mainly stocked with corn and sunflower products. New vessels are also now departing, including a wheat shipment bound for Ethiopia under the UN’s World Food Programme. 

Many cargoes have been relatively small. Traders and shipowners are likely seeking to ensure the corridor is working as planned and assess transit times before agreeing bigger sales, Neroba said. Vessels must be inspected in Turkey before entering and departing Ukraine, under the terms of the deal. 

War-risk insurance premiums also may limit competitiveness to far-flung destinations. Ukraine is historically a major corn supplier to China and sunflower-oil exporter to India. 

Corn and soybeans declined in Chicago. In soft commodities, sugar futures declined and cocoa edged higher in New York and London. Cocoa stockpiles held at port warehouses monitored by ICE Futures US exchange fell by 5,021 bags on Tuesday.