Cancellation of 30% Discount on Railway Transportation of Grain: Consequences for Farmers
The cancellation of the 30% discount on railway transportation of grain from frontline areas before the start of the sowing campaign has caused significant concern among farmers. The financial director of Agromino, Svitlana Omelchenko, emphasized that this decision is a true tragedy for farmers.
This is reported by AgroReview
Challenges for Farmers in Frontline Areas
Omelchenko noted that despite popular statements about the resilience of farmers in frontline areas, even the strongest individuals have their limits. She explained that the 30% discount applied not to the entire cost of transportation, but only to a portion of the tariff, which, while providing some support, was not sufficient.
“It sounds great. They say, 30% is a lot. In reality, railway logistics consist of two components: the tariff and the railway. And the 30% discount for frontline regions was applied to the tariff component. So, in the end, it’s not 30% off the entire transportation cost. It’s less,” she explained.
Market Consequences
Simultaneously with the announcement from Ukrzaliznytsia about the cancellation of the discount, traders began receiving notifications from transport and logistics companies about the inability to fulfill logistics contracts at previous rates. This led to an increase in service costs by $3-4 per ton, depending on the railway station.
In the context of trading margins in Ukraine returning to pre-war levels, this situation has become a painful blow for companies operating in eastern Ukraine. Omelchenko emphasized that the cancellation of the discount will hit traders the hardest, who have accumulated stocks, and in the medium term, this will lead to price increases for farmers.
“The current cancellation of the 30% discount has hit traders the hardest situationally. Because they have accumulated stocks. But in the medium term, this will impact farmers in eastern Ukraine, as the new logistics costs will be reflected in prices,” noted Omelchenko.