Highlights
- An extensive literature has focused on ways for Ukraine to maintain its grain exports despite Russian harassment in the Black Sea.
- However, there has been little focus on which constraints are the binding constraints, and so which reforms are the most urgent.
- In this paper we report on the results of a targeted survey and interviews with Ukrainian specialists in this area.
- The two most important constraints identified are the inadequacy of export/import capacity at Ukraine/EU borders (especially Poland) and the poor state of the network of the Ukrainian railway Ukrzhaliznytsia.
Abstract
Ukraine is a key global producer and exporter of grain. In peacetime, over 70% of Ukraine’s grain production is exported, and over 90% of these exports go through Black Sea ports. The Russian invasion of Ukraine, and consequently the occupation, blockade, or destruction of these ports, has disrupted the maritime supply chains. In this paper we examine the difficulties experienced in attempts to substitute other modes and outlets for grain exports. We consider the existing literature, which identifies and discusses a large and varied set of problems facing this process of substitution but leaves a crucial question unanswered: Which are the highest priority issues which must be addressed before other reform policies can be effective? We report the results of our use of directed surveys and interviews with Ukrainian industry insiders to seek to identify which areas seem to be most important and appropriate for primary and accelerated policy measures. The results suggest two issues that should be the highest priorities for policymakers at this point: 1) the inadequacy of alternative export modes and locations, unprepared as they were for mammoth volume diversions from the Black Sea ports (including rail capacity and other issues on the EU sides of borders), and 2) the long-standing weaknesses of the rail monopolist Ukrzhaliznytsia, with years of funding neglect resulting in shortage and obsolescence of locomotives and rolling stock as well as a shortage of skilled labor.
1. Introduction
The Russian invasion of Ukraine and the accompanying harassment (and worse) of cargo vessels in the Black Sea have had especially harmful consequences for the Ukrainian agriculture sector.
In peacetime, the agriculture sector (including upstream machinery and downstream processing) accounts for 20 % of the Ukrainian economy and 45 % of exports. It is not without reason that the national flag of Ukraine symbolizes the blue sky above the fields of grain: the sector’s output is mostly grains, and Ukrainian exports of wheat, corn, barley, and sunflower oil are purchased by countries in North Africa and the Middle East (for example) that rely on them to feed their growing populations. In peacetime, over 70 % of Ukraine’s grain production is exported, and over 90 % of Ukraine’s grain exports travels south from oblasts like Khmelnytskyi, Zhytomyr, Chernihiv, and Poltava by rail (60 %), motor carrier (31 %), and river barge (9 %) to ports like Mykovlaiv and Odesa for export on the Black Sea (USDA, 2023). The supply chain begins with motor carrier, which delivers grain from the fields to elevators, railway loading points, and inland waterway ports. It also makes deliveries from elevators to rail stations and even directly to seaports − although most of the shipments to the latter are made by rail (Bukovskyi, 2021). Fig. 1 and Fig. 2 show the broad geographic scope of production of corn and wheat, the two highest volume crops. With the main Black Sea ports now closed to traffic, exporters have been forced to seek other outlets.
The Russian invasion of Ukraine proved to be a significant disruptor of maritime supply chains (Karakas, et al., 2024). There is by now a large and growing literature examining export alternatives. Broadly speaking, these involve shifts of export transport mode from water carrier to rail and motor carrier (although also barges on the Danube), increases in throughput at the existing rail export border crossings that can be used for grains as they have the necessary facilities for this (although there are proposals to create new ones), wider use of the contenerized transport; and increases in the number of European Union ports to be used for transshipment for further export, including Constanţa (Romania), Varna (Bulgaria), Klaipeda (Lithuania), Gdansk, Szczecin − Świnoujście (Poland), Rostock, Hamburg, and Brake (Germany), and even Rijeka (Croatia). Bezpartochnyi and Britchenko (2022) add to the discussion of locational and external challenges for exporters a representative list of “internal negative factors that have impact on export logistics of grain and the activities of agricultural producers” such as increased costs for product transport and transshipment and inadequate export capacity at border crossings, including bureaucratic delays in customs and phytosanitary inspections and certification, with resulting significant and costly queues at borders. The incompatible railway gauges between Ukraine and the EU (Poland/Romania/Hungary/Slovakia) act as an additional, costly disadvantage that is particularly often reported in the literature (Pavlenko et al., 2023, Bodnar et al., 2024, Lousada et al., 2024, Skribans et al., 2024).
Similarly, a representative list of policy recommendations provided by Semenenko, et al. (2023) includes the construction of temporary storage facilities for grain storage in the border areas with the European Union (Poland, Slovakia, Romania) – Fig. 3 shows the preponderance of grain storage facilities in the southern oblasts near and including Odesa, as well as their conspicuous absence near the Polish border – the development of alternative routes for sea (Black and Baltic Seas) and river exports (Danube) and the formation of humanitarian corridors (Bulgaria, Turkey, Romania), increasing the capacity of domestic railways and road transport, acceleration of customs procedures for registration of export cargoes, and the use of intermodal rolling stock (that is, containers) to ease the pressure on the available supplies of traditional grain hoppers.
Jaspers (2023) analyses long-term measures to facilitate Ukraine’s trade (including agricultural exports), looking ahead to the post-war reconstruction and transformation of the country in which, the authors of the study argue, rail transport can play an enabling role. A principal recommendation of that study is to develop a new backbone 1435 mm gauge network (to be operated in conjunction with the existing 1520 mm network) to overcome the biggest technical challenge in relation to infrastructure – that is the incompatibility of railway gauges between Ukraine and the EU. However, the lack of specialized freight wagons has been identified as an additional critical issue for improved trade. Similarly, Jacyna-Gołda et al. (2024) believe that rail transport (especially intermodal) should play a key role in Ukraine’s post-war recovery.
Building new railway infrastructure and making greater use of intermodal services, however, is proposed not only in the postwar perspective, but also in the near-term. Medvediev, et al. (2024) develop a fuzzy logic model for assessing supply chain risk management and test it on three chains for grain deliveries from Ukraine to Poland. Interestingly, their policy implications include the advantages of building a special railway line, and they highlight a recommendation to introduce a piggyback train for the transportation of agricultural products from Kyiv to Gdańsk (as such a solution would reduce the transshipment risks and shorten travel time compared to road transport). Wider use of intermodal transport (particularly containers) for grain is a recurring proposal in the literature (Pavlenko et al., 2023, Li et al., 2023).
Finally, a good deal of the literature recommends geographic diversification of reconstructed supply chains. Skribans, et al. (2024) point out that despite the occupation or blockade of Ukrainian ports, traditional sea-based logistics chains still play a dominant role in grain exports from Ukraine (they are reporting a figure of 74.4 %) – however, with maritime shipments shifted from the main ports in the Odessa and Nykolaiv regions mostly to Romanian ports. In this context, they propose the wider use of rail transport by land from Ukraine to Baltic Sea ports that can be critical in the event of further escalation in the Black Sea region.
The literature thus lists numerous “negative factors” and certainly well thought out ideas for the addressing them. The problem is, resources are scarce. Political and policy attention spans are limited. All of these problems and policy recommendations cannot be addressed simultaneously, and some are almost certainly more pressing than others.
But which ones? It makes little sense to expand grain terminal capacities at Constanţa and Gdańsk if corresponding increases in grain tonnage cannot make it past international borders. It makes little sense to remove problems at borders (transshipment and storage capacities, addressing railway gauge incompatibilities) if the conditions of the Ukrainian roads and the Ukrzhaliznytsia (UZ) rail network prevent more grain from being hauled from the farms and storage facilities to the borders. The broad existing literature seems to leave a crucial question unanswered: What are the most important issues to be addressed that will have the most immediate impacts? As the Harvard Kennedy School Growth Lab notes, “Since not all constraints are equally binding and both policy resources and state capacity are limited, reforms will be successful only if they address the areas with the largest potential impact” (Hausmann, et al., 2024).
Therefore, we decided to ask some stakeholders. While Caramuta, et al. (2023) report – with perhaps some exaggeration – a general lack of research on the practical transport implications of the Russian invasion of Ukraine, and Jaspers (2023) emphasizes the problems in conducting their “on-site surveys and analysis”, our study falls in both categories – thus hopefully addressing general deficits in the literature in both categories.
2. Background: The role of Ukraine in world agricultural markets
The ongoing war on the territory of Ukraine, which began on February 24, 2022, has had severe humanitarian consequences and continues to cause huge and growing economic losses (Goyal and Steinbach, 2023). Among the destructive external effects of armed conflict, researchers highlight the disruption of complex integrated supply chains, the vulnerability of trade to external shocks associated with supply shortages, and price jumps (WTO, 2023). In agricultural markets, futures prices for wheat and corn have risen by 30 % and 10 %, respectively, compared with predicted trend levels (Carter and Steinbach, 2023).
Ukraine is a key player in the world food market and is among the top 10 producers and exporters of grain and oil crops, seed oils, and meal (Nekrasenko et al., 2019, Latifundist, 2022a, Latifundist, 2022). The share of Ukrainian exports in international trade is significant: corn – 15.3 %, barley – 12.6 %, wheat – 10 %, sunflowers – 4.3 %, and sunflower oil – 49.6 % (Glauber and Laborde, 2022). As a result of the important role of the Ukrainian agricultural sector in the world markets of agricultural products, researchers, analytical centers, and international donor agencies all emphasize the potential negative consequences of the ongoing war for the food security of developing countries (Mottaleb, et al., 2022).
In the pre-war period, the agricultural sector of the country’s economy underwent significant transformations. The development of small-scale farming (commercial and individual family farms of less than 20 ha) was significantly slowed, while the number and total area of large enterprises (agricultural holdings with an area of more than 10,000 ha) doubled in the ten pre-war years. The dynamic processes of the consolidation of agrarian business were primarily determined by the policy of supporting agriculture in the form of significant tax benefits and subsidies aimed at large-scale production, the disadvantageous position of small farms in accessing financial resources due to asymmetry of information and transaction costs, as well as the removal of the ban on the sale of agricultural land (Nivievskyi, et al., 2013). The annual production of grain crops increased from 56.3 million tons in 2011 to 85.3 million tons in 2021, while the volume of grain exports increased from 14.1 million tons (2011) to 49.6 million tons (2021), with a peak of 56.7 million tons in 2019 (UN Comtrade Database, 2023; FAO, 2023).
In the pre-war years, crop failures in many regions of the world, caused by drought, floods, and hurricanes, were significantly compensated for by the record harvest in Ukraine in 2019 (74.4 million tons) and, taking into account the rapid increase in the volume of agricultural production in 2021 and the fact that only 58.1 % of it was exported in the corresponding marketing year, Ukrainian grain had strong prospects to ensure a sustainable and increasing supply for poorer territories in the future.
Because of the war, Ukraine’s position on the world market of grain products has deteriorated, whether one focuses on production or export. The complication of supply chains prompted key partners of Ukraine to reorient to other suppliers. For example, India has increased imports of sunflower oil from Argentina, and China has begun to increase imports of corn from Brazil (Latifundist, 2022b). If the main trend of Ukrainian grain exports in the pre-war period was the reorientation towards the markets of developing countries, with a simultaneous increase in exports and, accordingly, a decrease in the volume of supplies to European markets, then in 2022 the geography of the Ukrainian grain products trade has fundamentally changed: there has been a significant increase in the volume of grain products exported to the EU. Romania, Poland and Hungary, all of them EU countries bordering Ukraine, have been unexpectedly added to the top 10 importing countries. Notably, from one year to another, exports to Romania increased by over 600 times, from a negligible US$2M to US$1.3B, which landed Romania as the biggest recipient of Ukrainian grains in 2022 (while in 2021 Romania was 61st on the list of importers). Exports to Poland and Hungary increased by around 50 times. In 2023, the total volume of Ukrainian grain exports continued to fall (adding to the 25 percent decrease in 2022 was another 10 percent reduction). Compared to 2022, the broader geographic pattern remained unchanged, but the volumes changed. A decrease in supplies to Romania by 20 %, Hungary by 50 % and Poland by 70 % with a simultaneous increase in supplies to Spain by 45 % and China by 4 % was the reason why Spain and China became the main importing countries in 2023 (UN Comtrade Database, 2024).
A desperate reaction to the blocking of Ukrainian ports has been the creation since the invasion of alternative logistics routes (Fig. 4) with more intensive use of other modes of transport (rail, road, and inland waterways through Danube ports) and passing through the territory of EU countries (“EU-Ukraine Solidarity Lanes”, 2023). As of December 2023, the Solidarity Lanes have allowed Ukraine to export about 88.1 million tons of grain, oil crops, and related products (EU, 2024). The creation of conditions for the rapid resolution of logistical problems related to shortages of rolling stock, the capacity of transport networks and transshipment terminals, and the conduct of customs operations and other inspections have contributed to some recovery of transportation processes and the increase in the volume of cargo processing and transit. Railway transportation of grains and grain products has gradually increased, but further growth has been limited by the disruption of transport connections due to the destruction of roads, bridges, and railways in Ukraine (Mottaleb, et al., 2022) and, since November 2022, further complicated by constant shelling of the energy infrastructure and, accordingly, the slowing down of terminal operations (Latifundist, 2022b).
From the beginning of the Russian invasion, the infrastructure, including the transportation and grain storage infrastructure, has been a favorite target of attacks. Available official estimates show the losses as of January 1, 2024 (NCRU, 2024). The total amount of damage to residential and non-residential real estate in Ukraine, including infrastructure, amounted to more than $157 billion (at replacement cost), of which damages to transport infrastructure reached $36.8 billion, that is almost a quarter. Among other infrastructure, 25,400 km of roads, 344 road bridges, 507 km of rail tracks and 126 railway stations and tracks were destroyed. The cost of road destruction is estimated at $26.7 billion, of bridges – $2.6 billion, of rail infrastructure – $ 4.3 billion, of air transport infrastructure – $2 billion, of sea port and inland waterway infrastructure – $0.85 biilon. Also the infrastructure for storing agricultural products has suffered significant losses. More than 8 % (or 3.3 mln tons) of the national grain elevator capacity has been destroyed; the cost of restoring it is estimated at $1.8 billion (ibid.).
Efforts to rebuild the infrastructure are being made. As of August 2024, 56 transport infrastructure projects had the “implementation status” (indicative budget – $0.34 billion) and further 22 the “initiation” status. Projects in this sector have the highest priority and thus the highest rate of confirmed financing by state and local budgets. The share of foreign contributions is, for the time being, very small – around 3 % (White Paper, 2024). Investments by private businesses in the reconstruction of damaged assets are substantial. 53 % of businesses reported direct damages from attacks, with nearly half describing their losses as significant. Nevertheless, 41 % have already restored the damaged assets, 25 % plan to do so soon, 28 % plan to wait until the war ends, and 6 % believe the reconstructions of assets would be impossible or impractical (EBA, 2024).
3. Logistics alternatives
Grain as a commodity cargo is usually transported in bulk in large quantities, which makes it favourable for transportation by rail. Although the instability of grain production processes causes difficulties in forecasting the harvest and, as a result, grain export volumes, competition among freight railway operators and improvements in rail infrastructure have the potential to attract grain freight flows from road transport to rail or water transport (Pittman, et al., 2020).
For a long time, railways were considered the most powerful transport artery of Ukraine, ensuring a stable transport flow and mass mobility of passengers and cargo. In the transport system of Ukraine (Fig. 5), railways provided from 55 % (2011) to 62.3 % (2021) of freight transportation (in ton-kilometers); the share of railways in the EU’s modal split is – with the exception of Lithuania and Latvia – much lower, with the average of 16.1 % in 2020 (EU Transport in figures, 2022). However, researchers and experts constantly draw attention to the critical state of the sector and the need for major improvements (Pittman, 2017, Melnyk et al., 2022, Yanovska, 2022). From year to year, the quality of the infrastructure, locomotives, and rolling stock deteriorates. The level of updating the material and technical base is critically insufficient to replace depreciating assets and, most importantly, to maintain the required level of safety (Yanovska, 2021). The pace of changes in the industry radically lags behind the dynamics of economic development, which results in a loss of potential to satisfy market demands.
The freight railway system of Ukraine, like that of Russia, China, and India, is the same basically unreformed vertically integrated, state owned monopoly inherited from the Soviet Union (Pittman, 2017, Yanovska, 2022). Also as in those other countries, especially Russia, the government and the monopolist have for years discussed alternative reform models and committed to opening up the system to competition in one form or another, only to repeatedly delay meaningful change (Pittman, 2013, Pittman, 2020). The reforms introduced in 2015, which were supposed to improve the situation and to begin liberalization of the rail transport market, are slowing down. Opacity, corruption risks, and anticompetitive behavior are observed. As a result, cargo owners and, in particular, grain traders face a number of difficulties that disrupt the rhythm of supply and increase the cost of products. Despite the fact that Ukraine committed to implement EU directives and regulations for railway transport (UCEP, 2023) – including the introduction of above-the-rail competition − the draft Law developed in 2019, which would bring national legislation into compliance with EU requirements, has not yet been adopted. As a result, legal conditions for the formation of a competitive and open market were not created before the start of the war.
Investments and legal reforms related to inland waterways also have some potential to alleviate constraints that threaten to hinder the ability of the agricultural sector to use its production and especially export capability (Nekrasenko, et al., 2019). Ukraine’s vast river system has in the past carried considerably more cargo than it did even in the years immediately preceding the current war.
The increase in the volume of grain transported by the Dnipro River (in particular) can temporarily relieve the limited capacity of the railway system. Inland waterways can be used to transport both agricultural products and non-agricultural bulk cargo, especially for export, as well as passengers. This, in turn, buys time to reform, restructure and reinvest in Ukraine’s rail transport. All this, in turn, will reduce the current road damage caused by its excessive usage.
The transport and cross-border capacity of railways is currently estimated to be only one-fifth of that of the pre-war (Minagro, 2023). The maximum processing of grain cargoes at railway border checkpoints reached a value of 1.15 million tons per month in December 2022, and the monthly average for the period from March 2022 to August 2024 was 0.78 million tons. At the same time, the maximum throughput capacity of the ports during the Black Sea Grain Initiative was 6.41 million tons per month in April 2024. On average, the ports (Chornomorsk, Odessa, and Yuzhny/Pivdennyi) processed exported grain cargoes with a total volume of 3.88 million tons every month. In total, for the nineteen months from March 2022 to August 2024, grain cargo flows were distributed as follows: 77.5 % were exported through Black Sea ports, 15.7 % via railway routes, and 5.6 % by trucks (authors’ calculations from MAPFU, 2024). This is a very significant difference from the peacetime situation, when the share of maritime transport was of 90 %.
4. Methodology
The heterogeneity of the results of the analysed academic research related to the most significant factors that affect resilience and potential of grain logistics chains suggests how important it is to focus on the real experiences faced by Ukrainian companies (producers, exporters, and transportation companies) in exporting grain using alternative routes and modes (mostly railways). We chose to survey the largest firms involved in order to seek their perspectives on the relative importance of the different constraints they face in the current wartime atmosphere (Fig. 6).
As the first step of the research, we selected a target group of the 20 largest Ukrainian grain consignor companies. The total volume of grain products shipped in 2022 by the selected companies amounted to 17.9 million tons (62.9 % of the grain freight flows of railways), and 276 thousand freight cars were used in the process of transportation. For comparison, companies which were not included in the sample ordered railway transportation of grain cargoes in the volume of 10.5 million tons (37.1 % of rail volume) using 158 thousand freight cars (authors’ calculations from UZ, 2023).
We sent a request to take part in a survey to representatives of the selected companies considered to be knowledgeable experts on the subject of the study. The selection of experts was primarily focused on top-level managers and senior specialists directly involved in the decision-making process in grain logistics, based on the assumption that they possess the relevant strategic and operational knowledge (as recommended by Creswell, 2013). Representatives of 18 of 20 companies agreed to participate in the research. In one of these companies two experts were separately surveyed. At this stage, to reach a broader set of perspectives and experiences in the Kyiv region, 3 further respondents were recruited from grain consignor companies not in the top 20. Therefore the final list of the experts from grain trading (consignor) companies in the study reached 22. In addition to the grain traders, 3 experts from the rail transport sector – representatives of the monopolistic rail carrier Ukrainian Railways (UZ), including the head of the unit level involved into rolling stock management – agreed to take part in the survey. In total, 25 subjects participated in the study.
The questionnaire used in the survey was administered between March and July of 2023 and consisted of two parts (hereafter referred to as Part A and Part B); it is available from the authors upon request. Part A was composed of 15 main points describing the possible factors of negative influence on the transportation of grain cargoes by railway transport. The list of factors was developed by the team of authors based on the results of the literature review (in the previous sections) and then expanded by including operational features of cross-border rail transportation. Considering the immensity of the new demands on export directions and points by the diversion of Black Sea cargoes, one main focus was on conditions at and around border points, especially those on the Poland/Ukraine border (see points c, e, g, I, m, and n). Then, considering the critical state of the railway infrastructure and the high level of wear and tear of the rolling stock of the Ukrainian railway (Yanovska, 2022), as well as the conditions of war and the related complication of transportation processes, the second main focus was on the railway in the territory of Ukraine (see points a, b, c, j, k, l, and o in Table 1). An additional point (#16 (“Other problems (specify)”) was proposed in case the researchers had not taken into account factors that could be important according to the surveyed experts; however, no obstacle was added to the list. The list of factors was treated as a list on the basis of which it would be possible, based on the experts’ assessment, to formulate the most important issues for policymakers to address at once.
Table 1. Descriptive statistics of the survey results.
| Empty Cell | Empty Cell | Mean | Std. Err. of Meas. | Median | Mode | Std. Dev. |
|---|---|---|---|---|---|---|
| a | Poor condition of the railway network | 2.04 | 0.17 | 2 | 2 | 0.84 |
| b | Available transportation capacity of UZ | 2.32 | 0.21 | 2 | 3 | 1.03 |
| c | Border crossing capacity (infrastructure) | 3.28 | 0.18 | 4 | 4 | 0.89 |
| d | Lack of rolling stock (UZ wagons, 1520) | 1.88 | 0.23 | 1 | 1 | 1.13 |
| e | Lack of rolling stock (EU wagons, 1435) | 2.77 | 0.20 | 3 | 3 | 0.92 |
| f | Lack of locomotives (UZ) | 2.62 | 0.19 | 3 | 3 | 0.92 |
| g | Lack of locomotives (EU) | 2.48 | 0.20 | 3 | 3 | 0.93 |
| h | Staff shortages (UZ) | 2.75 | 0.18 | 3 | 3 | 0.90 |
| i | Staff shortages (EU) | 2.81 | 0.25 | 3 | 4 | 1.12 |
| j | Available capacities for timely track repairs | 2.50 | 0.28 | 2 | 2 | 1.20 |
| k | Available capacities for timely repair of rolling stock | 2.25 | 0.26 | 2 | 2 | 1,16 |
| l | Lack of carrier competition | 2.35 | 0.24 | 2 | 1 | 1.15 |
| m | Ukrainian Customs | 2.30 | 0.21 | 2 | 2 | 0.92 |
| n | EU Customs | 2.19 | 0.20 | 2 | 2 | 0.93 |
| o | Non-transparent freight rates | 2.20 | 0.19 | 2 | 3 | 0.96 |
| Empty Cell | Estimation of a range of average values | 2.45 | 0.09 | 2.35 | – | 0.35 |
Source: compiled by the authors.
Each factor was to be assessed on a four-point Likert scale (Likert, 1932) where a higher score indicated a higher level of the problem: 1 – not a problem at all; 2 – minor problem; 3 – moderate problem; 4 – serious problem (Vagias, 2006). (Our first forays suggested that an 8-point or 10-point scale would sacrifice clarity for artificial precision.) In addition to assessment of the factors on the Likert scale, Part A of the questionnaire provided an open-ended opportunity for the respondents to discuss their experiences and evaluations of the situation.
In Part B of the questionnaire, it was first suggested to select one or more key factors that make grain transportation difficult and to comment on them. Then, the respondents were asked to answer two questions: “What has changed in the supply chain (or in other important business factors) because of the war?” and “Has the role of rail, road, or inland water transport changed?”.
5. Data analysis
Descriptive statistics were used to characterize the results obtained according by main points of the questionnaire. The relationship between the collected variables was assessed using the Pearson correlation matrix. Internal consistency, determined using the Cronbach alpha coefficient (Cronbach, 1951), was considered satisfactory (α=0.7597>0.7, Nunally & Bernstein, 1994). Cronbach’s alpha coefficient has been used as a common measure of reliability in assessment; it takes a value between 0 and 1 and correspondingly indicates perfect reliability if equal to 1 and that scores were assigned randomly if equal to 0 (Zeller, 2005). Values of the standard error of measurement (SEM), which assesses how the observed scores were attributed to measurement errors, were considered acceptable. Unfortunately the small sample size – assembled not without difficulty! – resulted in an absence of statistical significance for most of the differences in values.
The average scores ranged from 1.88 points to 3.28 points (Table 1) – none of the factors proposed for evaluation received an average score close to 1, which means that all the problems proposed for evaluation were seen as indeed significant obstacles to railway supply chains of grain logistics (“1″ meant “not a problem at all” on the Likert Scale).
Notes: Factors are given as [position on the base list / average problem rank]; factors of the basic list: a – poor condition of the railway network; b – available transportation capacity of UZ; c – border crossing capacity (infrastructure); d – lack of rolling stock (UZ broad-gauge wagons); e – lack of rolling stock (EU standard gauge wagons); f – lack of locomotives (UZ); g – lack of locomotives (EU); h – shortage of staff (UZ); i – shortage of staff (EU); j – available capacities for timely track repairs; k – Available capacities for timely repair of rolling stock; l – lack of carrier competition; m – Ukrainian Customs; n – EU Customs; o – non-transparent freight rates; p – other problems (specify).
Calculating the average points made it possible to reduce a complex set of problems to an ordered list (Fig. 7) that reflects the degree of influence of individual factors on the general state of grain logistics as perceived by experts. The highest average rank was given to the capacity of border crossings (average score of 3.28 points), which suggests the critical importance of border infrastructure problems. It became the only factor that, according to a weighted expert opinion, fell into the category of “serious problem” with 56 % of respondents having assessed this factor this way; and with none of them having recognized it as a “not a problem at all” (Table 2).
Table 2. Distribution of the number of responses by levels of attitude to the problem, %.
| Empty Cell | Empty Cell | No problem at all | Minor problem | Moderate problem | Serious problem |
|---|---|---|---|---|---|
| a | Poor condition of the railway network | 28 | 44 | 24 | 4 |
| b | Available transportation capacity of UZ | 23 | 39 | 29 | 10 |
| c | Border crossing capacity (infrastructure) | 0 | 28 | 16 | 56 |
| d | Lack of rolling stock (UZ wagons, 1520) | 56 | 12 | 20 | 12 |
| e | Lack of rolling stock (EU wagons, 1435) | 14 | 14 | 57 | 14 |
| f | Lack of locomotives (UZ) | 13 | 29 | 42 | 17 |
| g | Lack of locomotives (EU) | 19 | 24 | 48 | 10 |
| h | Shortage of staff (UZ) | 8 | 29 | 42 | 21 |
| i | Shortage of staff (EU) | 21 | 16 | 26 | 37 |
| j | Available capacities for timely track repairs | 22 | 39 | 6 | 33 |
| k | Available capacities for timely repair of rolling stock | 32 | 42 | 5 | 21 |
| l | Lack of carrier competition | 30 | 26 | 22 | 22 |
| m | Ukrainian Customs | 20 | 40 | 30 | 10 |
| n | EU Customs | 24 | 43 | 24 | 10 |
| o | Non-transparent freight rates | 28 | 32 | 32 | 8 |
Source: compiled by the authors. Percentages may not add to 100 due to rounding.
The problem of the lack of rolling stock (UZ broad-gauge wagons) −- had the largest number of responses “not a problem at all” (56 %, Table 2). However, 20 % of respondents rated the problem as “moderate” and 12 % as a ”serious” one which shifted of the average value to the category of a small problem (average score of 1.88 points, Table 1). This can likely be explained by the different conditions of access to rolling stock for certain groups of companies. Some shippers – for example, large grain companies like Kernel and Nubilon −-have their own freight cars, so that the presence or absence of an offer from the monopolist UZ is not fundamental for them. However, when the consignor does not possess its own rolling stock, then the shortage of UZ freight cars and/or the creation of bureaucratic barriers by the monopolist becomes a problem. This determined the differentiation of the answers and at the same time demonstrated some benefits of the (partial) liberalization of the transport market, in connection to the ownership of the wagon fleet.
Factors other than, at one extreme, capacity of border crossings (“a serious problem”) and at the other, lack of UZ broad-gauge rolling stock (“a minor problem”), with varying degrees of importance, fell into the “moderate problem” category.
Further analysis was based on 103 comments provided by the interviewees and may seem not fully consistent with the Likert scale analysis above. As is natural, experts with different experiences and perspectives focused on different issues. As for the factors themselves, in general, the comments related to all problems proposed for evaluation, but the number of comments differed significantly. The smallest number of comments (n = 1, that is 1.3 %) concerned the factor “Ukrainian customs”, while the largest (n = 8, 10.4 %) was received in relation to the problem of “lack of personnel (UZ)”. In general, the offered explanations reflect the various discussions of issues related to the carrying capacity of railways, and demonstrate the discursive possibilities in discussing the resilience of railway routes in grain logistics supply chains.
6. Discussion
The results of the main part of the interviews highlighted the two broad issues that had motivated the organization of our survey: export capacities at border points unaccustomed to the new volume demands, and long-standing weaknesses of Ukrzhaliznytsia. In this section we elaborate on the discussions we collected regarding these points.
6.1. Border infrastructure and other export capacity issues
The main area of concern of the experts was linked to infrastructural factors, primarily related to the capacity of railway border crossings (3.28 points, problem ranked 1 in Fig. 7). Experts emphasize that in connection with the change of logistics routes to heavier reliance on the western border crossings, the problem of capacity, in particular on the Lviv railway, is more relevant than ever. The demand for border crossing is significantly greater than the capacity. Due to the insufficient capacity of border crossings at border stations, freight cars have to wait to cross the border. Sometimes long queues are created, lasting, according to various estimates, up to one month or up to 40, even 60 days. Such long delays lead to spoilage of grain shipments and disruption of contracts. Experts attribute the need to change wheel pairs and the slow process of transhipment of cargo from broad to standard gauge tracks as important reasons for this state of affairs. They emphasize the need to update, first of all, the number of station tracks. It was even stated that the main limitation for today is on the EU side.
Experts also see a certain solution to the problem of border crossings in changing the mode of operation of the customs office. In general, customs factors did not cause wide discussion. The assessment was moderate (Ukrainian customs – 2.30 points, problem rank in Fig. 7 – 10; EU customs – 2.19 points, problem rank in Fig. 7 – 13). It is noted that the Ukrainian customs authorities work in a special security mode, that is, inconveniently: they do not work on weekends and during air alerts. EU customs authorities, on the other hand, exhibit more consistent and timely operations. Some interviewees suggested that if both customs organizations shared a working schedule in advance and followed the agreed plans for the transfer of grain cargoes, it could increase the capacity of the border crossings.
A number of experts attributed infrastructural factors as the key problems complicating grain transportation. It was stated that the capacity of border crossings and the subsequent transportation and storage of grain in the EU countries is the main problem of grain logistics, since the infrastructure that receives and processes exports had never foreseen such a load that we have to work with today. To increase the turnover of wagons, railway lines are being repaired and some new crossing points are being put into operation. In March of 2023, UZ began transporting goods between Ukraine and Moldova on the restored Berezyne – Basarabeaska section, where the third border crossing between the countries was opened – Serpneve-1 – Basarabyaska. In January of 2023, Romania announced plans to modernize the railway line of the Dermenest – Vikshan branch to the border with Moldova in order to increase the volume of cargo transportation. The EBRD is supporting the construction of new logistics terminals as well as dredging of the Danube River in the Romanian port of Izmail in order to free up existing capacity of transshipment and storage of grain, bulk, and general cargo.Romanian port operator Socep is constructing a modern grain terminal in the port of Constanţa, which in 2023 increased its volume of grains exported by 50 % from the previous year. However, the implementation of these solutions requires a long period, measured in years. Meanwhile, at the moment, the total accumulation of the wagon park awaiting unloading at the western border crossings exceeds ten thousand units on average.
A more important problem in the expert view is the insufficient availability of the standard-gauge (EU) wagons (“lack of rolling stock (EU wagons, 1435)” was given 2.77 points by average, problem rank – 3).. According to them, before the full-scale invasion of the territory of Ukraine, the transportation of grain cargoes was almost never carried out by land through the EU countries on a standard rail gauge; accordingly, the fleets of freight cars of the countries involved in the solidarity routes were not ready for a significant increase in cargo flows. In addition, according to experts, grain transportation markets in the EU have used mostly road transport. Therefore the problem of the lack of a fleet of standard-gauge freight wagons is important for the consignor companies, and, as such, experts expressed an urgent need for them.
Explanations regarding the factor of lack of personnel from the EU countries were not too numerous, but the identified factor was evaluated as extremely important (2.81 points, problem rank – 2, Fig. 7). 37 % of respondents assessed the shortage of personnel as a serious problem, 26 % as a moderate problem. Experts drew attention to the fact that receiving freight cars at the border, carrying out customs operations, and conducting phytosanitary and veterinary inspections are slow and, importantly, not around the clock. The experts noted that the employees who ensure the implementation of the specified operations are not ready for such a volume of transportation. At the same time, however, there were such comments as “we do not observe this problem”.
6.2. Transportation
The problem of grain cargo transportation has become the most debated topic for experts. Despite the fact that, as noted above, the factor of lack of rolling stock (UZ wagons, broad gauge) was not assessed at a significant level (1.88 points, problem rank – 15, see Fig. 7), the experts provided a number of explanations and comments covering various causes and demonstrating existing and potential mechanisms to overcome the problem. It was emphasized that wagons owned by UZ have a high degree of wear and tear. 73.3 thousand wagons (70 %) have exceeded the normatively established service life (18.4 thousand, or 17.6 %, have even served one and a half of the established service life) and according to traffic safety requirements should be written off (VR, 2022). From 2019 to the present, due to the limitation of asset maintenance expenses, UZ has had to scrap about 20 % of its working fleet of freight cars (NAPC, 2023). There has been assistance by international agencies like the UN, the World Bank, the EBRD, and USAID to UZ for the purchase of rolling stock, but a large proportion of international funding has been targeted at network repair and locomotive acquisition. Experts noted, however, that although during the period of shortage of rolling stock (high season) UZ is not able to satisfy the market, last year the shortage was felt for only a very short period of time, while in most cases even a surplus of freight cars was observed.
The problem of the lack of rolling stock is not critical as, on the one hand, the consignors have their own wagons and, on the other hand, the limited capacity of railway border crossings (infrastructural factor) significantly restrains the increase in freight flows and therefore reduces needs. The negative effect of this factor is also mitigated by the fact that Ukraine has a full-fledged market of services for the provision of freight cars, the price of which is set by the mechanisms of economic competition. UZ is only one of many participants of this market, although it has a dominant position with a share of more than 35 % (VR, 2022). Experts also emphasized that the shortage of own freight cars is due to huge queues at border crossings (infrastructural factor) and as such “artificially created”. However, the reduction in the rate of turnover not only causes shortage of rolling stock, but also entails an increase in the cost of using it and significantly increases the total cost of transportation.
Comments on the problem of the lack of UZ locomotives, which received a rather strong assessment (2.62 points, problem rank – 5, Fig. 7), are connected to the explanation given regarding broad-gauge freight cars (1520). The problem of locomotive traction is the most complex and sensitive. Due to systematic underfunding of repair works (funds were allocated for only 1/3 of the need), as of the beginning of the war, hundreds of locomotives in the stock park – which is 3900 units in total (Mintrans, 2023) – could not be restored. More than 60 % of the locomotives in operation were technically unfit, so that the current standards and rules of technical operation in principle prohibited their use (VR, 2022). The higher assessment of this factor compared to the factor of the condition of freight cars is also explained by the fact that the full liberalization of the freight transport market has not taken place in Ukraine. Among other things, the access of third party locomotives to public tracks has not been settled, although the possibility of attracting private investment in the transport industry and creating equal competitive conditions for all market participants, including private ones, has been widely discussed (CES, 2019). There have been isolated cases of the use of private locomotives in Ukraine, but the full liberalization of the freight transportation market has not taken place (Pittman, 2017, Yanovska, 2022).
All in all, the consignor companies mostly assessed the state of the locomotive fleet as a moderate problem (52 % of the total points by subgroup of respondents) and a serious problem (28 %). Experts also draw attention to the fact that most of the locomotives are physically obsolete, having an unsatisfactory technical condition and a high degree of wear and tear. Although the negative consequences of the operation of the outdated locomotive fleet (both mainline and shunting locomotives) are acutely felt only in certain sections, they lead to a general decrease in the average speed of movement of cars, including cars owned by UZ, and cause an increase in transportation costs. However, as experts noted, more problems related to the operation of the locomotive park arise as a result of partial interruptions with diesel fuel, and in connection with the decrease in the volume of transportation in general, so that the problem of the shortage of locomotives is not considered critical.
In connection to the factor “absence of locomotives (EU)” (2.48 points, problem rank – 7, Fig. 7), the vast majority of respondents assessed the factor of locomotive traction in the EU as a “moderate problem” (48 %) or as a “small problem” (24 %, Table 2). The experts drew attention to the fact that the problem with locomotives is not felt so strongly due to the low capacity of border crossings; in addition, they noted that “the EU carriers take away the wagons in a timely manner”, and even that “we do not observe this problem”.
A small number of comments and a certain dissonance between their content and the provided assessment allows us to suggest that the reason for such an ambiguous attitude is the insufficient level of awareness of the participants of transportation from the Ukrainian side about the operating conditions of the transport services market in EU countries and the character of cooperation with companies active on a liberalized competitive market with a large number of private carriers. Such a hypothesis is supported by a similar situation in the discussion of issues concerning EU standard gauge wagons. In other words, consigners whose grain languishes at the border may not be close enough to the situation to know whether the problem is with the actual border capacity or the capacity of trains on the other side of the border to accept the grain.
Comments on the factor “available transport capacity of railways” (2.32 points, problem rank – 9, Fig. 7) in many respects in terms of content repeat the ideas expressed regarding the factors discussed above. The experts noted that the available unused transportation capacity of UZ is higher than in the EU countries and with the lower volumes of transportation, which were reduced during the war, no special problems arise. UZ has changed its approach to regulating flows and load in accordance with production capabilities, which was carried out earlier. Before the war, UZ synchronized the volume of load with the volume of transportation capacity, which helped to avoid bottlenecks. Ignoring for a long time the undoubted limited capacity of the western border crossings, UZ began accepting far more cargo than that capacity could handle. As a result, experts see the problem less in the available transportation capacity than in the incorrect use of capacity.
The issue of available capacity for timely repair of rolling stock (2.25 points, problem rank – 11) did not cause much discussion among experts. Several people stressed that they did not have complete information on this topic and therefore it is difficult for them to comment. The analysis of the content of other comments shows that the available capacity is generally sufficient to cope with the repair of rolling stock, and the only issue is financing: it is the lack of funding that leads to untimely execution of the necessary repair works. Interestingly, only one expert comments on the unsatisfactory condition of the UZ rolling stock in the context of the Ukrainian freight cars not being accepted at border crossings due to failure to meet European standards. Unaccepted wagons are forced to go in the opposite direction, which leads to losses for freight forwarders and shippers.
The factor “lack of staff UZ” (2.75 points, problem rank – 4) sparked a much more lively interest – both in terms of the number and breadth of explanations. 29 % of experts recognized this factor as a small problem, 42 % as a moderate problem, and 21 % as a serious problem (Table 2). It was stated that there is no significant shortage of operating personnel with today’s volumes of transportation, but meanwhile there is a shortage of personnel at the loading stations. The shortage of commercial agents leads to incorrect charges for the use of wagons and causes idleness of rolling stock. The shortage of train fitters and wagon management workers causes untimely delivery or removal of wagons at the loading and unloading fronts, which reduces the actual processing capacity of the fronts. There is a shortage of workers to maintain, repair, and upgrade the infrastructure. As experts note, the systemic nature of the problems is due to the low level of wages, which causes a significant outflow of skilled personnel and hinders attempts to hire skilled replacements. Experts emphasize that the lack of personnel and the low level of remuneration leads to a deterioration in the performance of UZ employees in their direct work and entails a decrease in the quality of the services provided.
It was difficult for cargo owners to comment on the factor “available capacities for timely repair of the track” due to the lack of awareness in this matter, as well as the fact that internal technological problems are not observed from the point of view of consumers of transport services. However, representatives of UZ provided an explanation. The main reason for the untimely repair of the track is seen not so much in the shortage of capacity to do so, but in the lack of funding for the repair work.
The factors connected with railway competition and tariffs were assessed as moderate obstacles. Comments provided by the respondents on the factor “lack of competition of carriers” show a complex and sometimes contradictory perception of the problem (2.35 points, problem rank –8, Fig. 7). 30 % of experts rated the factor at 1 point (not a problem at all), 26 % of them rated it at 2 points (small problem), 22 % each at 3 points (moderate problem) and 4 points (serious problem) (Table 2). Several experts, based on the modern realities of the functioning of the cargo transportation market, limited themselves to the laconic statement: “UZ is a monopolist.” Others provided more detailed explanations with an emphasis on the problems and noted that the activities of UZ, as a monopoly operator of strategic infrastructure and administrator of the transportation system, led to the shortage of wagons as well as refusal of responsibility for the speed, times of delivery of goods, and the return of empty wagons. There was also a milder judgment: given the state of war, the problem of liberalization of the market of railway carriers cannot be considered critical. Meanwhile, among the experts there were also those who believed that the problem is small because the quality of transportation is at a fairly high level. However, despite the ambiguous perception of the factor, the average rating allows it to be identified as a rather significant obstacle for grain logistics.
Comments on the factor “non-transparent freight transportation tariffs” quite reasonably linked the shortcomings of the current tariff policy with the problem of competition. The rating given to the factor was moderate (2.20 points, problem rank – 12, Fig. 7). 32 % of respondents identified the factor as a “minor problem” or a “moderate problem”. The experts stated that in order to make tariffs transparent, there should be competition between carriers on the UZ network. In more critical comments, it was noted that constant changes in the norm of the average speed of transportation, non-transparent charging of additional station fees, and fees for use and storage hinder the resilience of grain logistics. It was noted that there is no clear understanding of when and by how much the cost of transportation will increase, and this makes it impossible to plan long-term contracts. Rental of wagons through the government’s central procurement system (the “Prozorro system”) gives an advantage to short-distance transportation, because exports take longer and export carriers are not able to offer the same rental rate per wagon. More tolerant explanations confirmed that there is a certain difficulty in understanding the present tariff policy for transportation, but it cannot be considered a serious problem, since all information is publicly available and everyone has the opportunity to use it.
7. Conclusions
We began this paper by noting and citing the large number of papers that have addressed the current issue of the impacts of the Russian invasion of Ukraine on the globally important volumes of Ukrainian grain and grain product exports, and in particular on the serious problems created by the slowing or cessation of Ukrainian grain exports from Odessa and other ports on the Black Sea. We noted that different scholars focused on different problems as well as different policies for addressing them, but that there seemed to be an absence of consideration of priorities: Which solutions, directed to which new problems, deserved the highest priority?
To address this question, we assembled a panel of 25 industry experts in the Ukrainian grain sector, mostly officials from the largest consigners but also a few from smaller consigners and from the monopoly railway Ukrzhaliznytsia. We created a survey based on the analyses in the literature, and requested both rankings of the importance of different factors (on a Lickert scale) as well as unstructured comments on their analyses and experiences.
The small size of the sample precluded the use of sophisticated statistical techniques (or even findings of statistically significant differences among the different factors), but two factors stood out in the responses: 1) the inadequacy of alternative export modes and locations, unprepared as they were for mammoth volume of diversions from the Black Sea ports (including rail capacity and other issues on the EU sides of borders), and 2) the long-standing weaknesses of Ukrzhaliznisya, with years of funding neglect resulting in shortages and obsolescence of locomotives and rolling stock as well as a shortage of skilled labor.
It is our hope that our findings will assist in the choice of the most important policy instruments going forward as well as contribute to the developing economic, geographic, and policy research on this important topic.
CRediT authorship contribution statement
Viktoriia Yanovska: Writing – original draft, Project administration, Methodology, Investigation, Data curation, Conceptualization. Marcin Król: Writing – review & editing, Writing – original draft, Methodology, Formal analysis, Conceptualization. Russell Pittman: Writing – review & editing, Writing – original draft, Project administration, Conceptualization.
Declaration of competing interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Source: https://www.sciencedirect.com/science/article/pii/S2590198225000429#f0010
