Maryna Semenenko, Logistics Deputy CEO at Kusto Trading and Logistics, speaks about the main problems of grain logistics at the Ukrainian Grain Forum.
The Ukrainian Grain Forum is a specialized event for agricultural producers and grain processors, where participants discuss the most pressing topics and issues for agribusinesses: transportation from the field to the grain storage facility; cargo, storage facilities, and innovative equipment safety, monitoring and control; grain storage and processing; search for market outlets.
Kusto Agro business areas
Kusto Agro grows and sells plant products using innovative technologies and modern machinery to meet the needs of both national and foreign markets. The company is actively developing in crop production, livestock husbandry, logistics, and trading.
Like any other agricultural holding, we have a goal to develop and get a profit, the main of which the company receives from grain exports and successful contracts.
Kusto has more than 30% of export contracts concluded on forward terms. To comprehend the contract margin, the company conducts appropriate calculations and compiles plans for the next year, and the main expense portion is grain transportation. Consequently, it is very important to trace and predict logistics issues.
Investments in Kusto Agro logistics
The Kusto Agro Company, like other small and medium-sized agribusinesses, has faced the problem of grain transportation, namely, timely pickup of products from grain storage facilities. To improve grain logistics, the agricultural holding management started investing in logistics and has purchased 70 grain rail cars as of today.
Taking the increase in grain production and exports into consideration, it is currently extremely important to implement logistics solutions. In grain transportation, the main load of about 70% falls on railroad transportation, and that is exactly where some problems arise.
Each year, exactly during the active transportation season, the company observes “changes in the rules of the game” from the Ukrzaliznytsia railroad transportation monopolist. Among other main problems, Maryna Semenenko singles out an unpredictable rate-setting policy in this area.
Indeed, each season, Ukrzaliznytsia introduces a new rate-setting policy and new grain car distribution and supply conditions. Therefore, the agribusiness cannot predict the possible profit since the lion’s share of the funds goes to product transportation to the port.
“In just the last two years, the logistics cost has almost doubled. We invest significant costs in logistics and get low-quality transportation services instead,” says Maryna.
Trip working is an equally important issue. Some cargoes do not travel according to the cargo transportation contract. As a result, cargo movement slows down, and the company cannot clearly plan logistics and execute contracts. The lack of railroad engines is another important issue in this area.
Grain cars are sometimes provided to the storage facility to collect goods only once a day. Besides, 40% of the railroad tracks need urgent repairs. Experts predict that by 2025 this figure will increase to 65%. This will result in a significant decrease in speed and create the chance of train derailments.
As of the beginning of 2019, 3.46 thousand railroad sections were closed, and their total length is 1857 km. The main reason for closing was the deterioration of the rails and their poor technical condition.
Currently, to increase grain cargo exports, it is necessary not only to improve logistics but also to develop infrastructure: build new efficient grain storage facilities and increase the loading capacity of port and border stations.