Traders Blaze New Trails as Shipping Risks Shackle Ukraine Grain

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(Bloomberg) — With shipbrokers still hesitant to lease vessels to transport grain out of Black Sea ports, Ukrainian commodity trader Barens Group is looking at buying its own.

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Russia and Ukraine reached a deal last week to unblock the shipment of millions of tons of grain from Odesa and other ports. But the dangers posed by mines and Russian missile attacks is making the insurers, banks and brokers hesitant to make deals.

That’s forcing traders to become more creative when it comes to the risky business of shipping Ukrainian grain. While the industry still awaits the opening of a safe corridor for shipments, decisions on purchasing and scheduling need to be taken now, said Ilya Medvedenko, investment and finance director at Baren.

“Currently we’re looking at two handy-size vessels with a partner of ours so we can ensure our customers stable supplies,” said Medvedenko, adding that they’re likely to be second-hand bulk carriers from Greek or Turkish shipowners.

Predominantly active in the grains markets, Barens is one of a clutch of small and mid-size commodity trading houses seeking to restart Ukraine’s exports of wheat, barley, vegetable oils and corn.

“Financing is non-existent at the moment if we’re not talking about larger traders who are financed against their balance sheets,” Medvedenko said. “At the moment, you need to apply your own equity if you want to buy grains cargoes.”

Credit is the lifeblood of commodities trading, where merchants typically rely on bank loans to finance the purchase of physical cargoes. Typically banks and other financiers will not send funds unless the goods are fully insured.

“We’ve spoken to a couple of commodity trade finance funds and they might start looking at cargoes when they get to neutral waters and safe territory,” Medvedenko said. “But farmers need payment on the ground, ex-works or at the elevator or warehouse — that’s where there’s a funding gap.”

In some cases, Barens is bartering fertilizers and diesel in exchange for grains at a fixed price, which can be less risky than making prepayments to farmers. With the world clamoring for grains, margins are good for traders who can complete deals. The trading company hopes owning the vessels will allow it to offer a better service.

“The main thing is execution at the moment — finding insurance or, if you cannot do that, finding an entrepreneurial shipowner who is prepared to go to the destination anyway,” said Medvedenko. “At the end of the day the world needs a solution.”

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