Dividends and Ship owners face risks to extract grains from Ukraine

One of the facts people in general know about Ukraine is that the country is the bread basket of the world. They might not not why, but if you think about the great plains in the US where the wheat grows, you will know the answer. Parts of Ukraine have been growing grains for thousands of years and the wheat goes to the markets in Europe and Africa. In many countries in Africa the government supports the price of wheat which allows food to be bought by the poorest of citizens. When Russia invaded Ukraine, the flow of grains was cut off.

For months, Turkey and the United Nations have been concerned and trying to negotiate to move the wheat and other grains from the Ukraine to markets. Russia wanted shipments to be halted because that would be a revenue source for Ukraine to buy more defense items.

In an article by Aya Batrawy of the Associated Press, agreements have been reached to allow ships to go to the ports in the Ukraine and deliver grains. That is the easy part to reach agreement. The hard part is every war leaves military explosives in the sea and near commerce generating facilities.

The theory according to Guy Platten, secretary general of the International Chamber of Shipping which represents 80% of the world’s merchant fleet is the grains would be moved through the Black Sea from the Ukrainian ports to Turkey where it would be inspected by people from Ukraine, Russia, Turkey and the United Nations. To journey from the Black Sea to the Mediterranean Sea the ships have to travel through the Bosphorus Strain in Turkey. That is the journey of the ships but in a war how does it work and will the ships be safe?

The grains to be sent include wheat, barley, corn and sunflower oil.

According to Michelle Wiese Bockmann, a shipping and commodities analyst at Lloyd’s List, a global shipping news publication, the big issue for the shippers is how much will be the insurance rates for the ships? A ship typically carries between 20 and 25 seafarers, will they be safe?

Prior to the war, approximately 4 to 5 million tonnes of grain were moving from Ukraine in addition Russian grains were being exported. In May, Ukrainian shippers were able to ship 1.5 to 2 million tonnes in May and June, but it cost more in terms of smaller loads on trains and smaller ships on rivers. Grain is one of those commodities where freighters make a great deal of economic sense to transport it.

Linking to dividend paying stocks, we all hope the normal cycles of the economy go through the normal cycles of economy and peace or stability is normal. Companies can deal with some weather concerns but man made wars are a different thing, because the time frame lasts longer. A weather event while damaging tends to be short in duration (less than a week until rebuilding time). When there are market opportunity people can find alternatives but there are less costly methods to doing logistics.

There are more questions than answers, till the next time – to raising questions.


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