Ukrainian grain producers scramble for alternative storage amid high stocks

High stocks and a severe shortage of traditional storage options are forcing Ukrainian grain producers to seek alternative means to store their material ahead of the start of the new marketing year, market sources said Thursday.

Based on information on storage capacities in eight of the country's regions, Ukraine could face a storage shortfall of up to 20 million mt because of damage to the domestic silo network from the war that started late in February or that are now under Russian control.

Pre-war domestic storage capacity was an estimated 57-60 million mt, according to market observers.

There was a significant carryover of stocks from the 2021/22 marketing year when Ukraine harvested a record crop. But logistical issues prevented export of this material; and on top of this there are expectations of a decent crop in 2022/23.

These factors have forced Ukrainian producers to seek non-traditional storage methods at inland silos, including using silo bags.

This storage method was used in Ukraine on an extremely small scale before the start of the war but demand for it has spiked recently to make up for the acute lack of available storage space.

This has driven the price of silo bags higher by 50-60% since the start of the war - prices vary from €680 for 60-meter bags to €990 for 90-meter bags. A 75-meter silo bag can store roughly 230-250 mt of corn.

As well as the increasing costs, this storage method is complex and less convenient in loading for transport, sources said.It requires additional knowledge and experience for proper bagging and control procedures, as well as renting or purchasing the necessary equipment, to avoid loss of quality and as a result loss of crop and money.

"To calculate the storage cost you should consider the following expenses: 1. The price of the silo bag itself; 2. Cost of bagging and unbagging; 3. Storage period; 4. Cost of security providing. 5. Lost profit from a field," BZK Grain Alliance AB deputy CEO and chief commercial officer Tahir Musayev said.

Grain can be stored for up to eight months with no critical loss of quality in silo bags, depending on various quality parameters, including moisture levels at the time when the grain is bagged. Most Ukrainian storage contracts are for 12 months although grain is typically sold and shipped at a fast pace.