Auto vs railway: what is the current situation with grain transportation?

29/ 09/ 2021

The grain market in Ukraine is steadily developing, which means that the need for grain transportation will also grow. Grain logistics can be divided into two stages - harvesting from fields and cargo delivery from elevators to the port. If we talk about harvesting grain from the fields, then 100% of the cargo is transported by road. At the stage of delivery to the port, about 50% of cargo is rail transportation, 35% is by road and 15% is by river. As of today, we have seen a very difficult situation with railway transportation from the side of UZ since the second half of August. Delays in the delivery of wagons to elevators after the application are 10-20 days. The structure of the company G.R. Agro has its own fleet of grain carriers in the amount of 60 units. For us and our clients, when trading on the spot market, motor transport is a very important insurance tool. We can put our goods or customers goods on wheels at any time and transport it to the port without violating delivery schedules under contracts with partners. During the delay of active harvesting companies in the regions, we redistribute vehicles from field–elevator transportation to elevator-port. Plus, there is also the fact that an active state program for the construction of roads has now been launched and this allows us to keep the share of road transport. A year or two ago, the dynamics of the condition of the roads was very negative, which affected the operating costs of cars. At the moment, it is expected that from 01.10.2021, all players in the road transport market will adhere to a net load of up to 25 tons. At the same time, the freight rates of vehicles remain stable for now. The market has adapted, and the main factor has been the growth of railway tariffs. UZ is changing its approach to pricing and calculating tariffs, and the financial feasibility of transporting grain by rail is becoming less obvious.

The grain market in Ukraine is steadily developing, which means that the need for grain transportation will also grow.

Grain logistics can be divided into two stages – harvesting from fields and cargo delivery from elevators to the port. If we talk about harvesting grain from the fields, then 100% of the cargo is transported by road. At the stage of delivery to the port, about 50% of cargo is rail transportation, 35% is by road and 15% is by river. As of today, we have seen a very difficult situation with railway transportation from the side of UZ since the second half of August.

Delays in the delivery of wagons to elevators after the application are 10-20 days.

The structure of the company G.R. Agro has its own fleet of grain carriers in the amount of 60 units. For us and our clients, when trading on the spot market, motor transport is a very important insurance tool. We can put our goods or customers’ goods on wheels at any time and transport it to the port without violating delivery schedules under contracts with partners. During the delay of active harvesting companies in the regions, we redistribute vehicles from field–elevator transportation to elevator-port.

Plus, there is also the fact that an active state program for the construction of roads has now been launched and this allows us to keep the share of road transport. A year or two ago, the dynamics of the condition of the roads was very negative, which affected the operating costs of cars.

At the moment, it is expected that from 01.10.2021, all players in the road transport market will adhere to a net load of up to 25 tons. At the same time, the freight rates of vehicles remain stable for now. The market has adapted, and the main factor has been the growth of railway tariffs. UZ is changing its approach to pricing and calculating tariffs, and the financial feasibility of transporting grain by rail is becoming less obvious.