On November 3, CNN reported that drones had struck at least 12 merchant ships in the Black Sea in recent weeks and that Ukraine exported 1.09 million tons of wheat in September, half the 2.05 million tons of a year earlier. CNN put the share of Ukraine's agricultural exports that normally transit the Black Sea at about 90 percent. The same day, Al Jazeera reported estimates from Ukrainian farm and market analysts that about 60 million tons of grain had been harvested this year and that hardly more than half of it could leave the country by land routes.
Strip out everything except the logistics and what remains is a corridor whose primary leg has stopped and whose secondary legs are being asked to carry a load they were never sized for.
Capacity in the state that matters
A corridor is usually described by its best route: the port, the vessel size, the tons per month in a normal year. That number is the capacity in the state where nothing is wrong. The number that decides whether the harvest moves is the capacity in the state where the primary route is closed, and that is the capacity of the second-best route.
The arithmetic is unforgiving. If the sea leg carries 90 percent of the flow and rail and road carry 10 percent, then moving even half the normal total overland means the land legs must carry 5 times their normal volume. Rail cars, border crossings, and river barges do not scale 5 times on demand. They fill, and the queue forms at the farm.
The second route sets the ceiling, and a planner who reads the corridor's capacity as its sea capacity has planned on the wrong number.
The harvest becomes a storage problem
When export capacity falls below production, the question changes from how to move the grain to which grain moves and where the rest waits. That is a sequencing and inventory decision.
Grain that cannot leave has to be stored, and storage has a capacity, a cost per ton per month, and a loss rate. Grain that waits in the field loses more than grain in a silo. The allocation that preserves the most value is not first come, first served, and it is not largest shipper first. It is the allocation that fills the constrained route with the tons that lose the most value by waiting, and fills the silos with the tons that lose the least.
Few exporters run that calculation, because in a normal year the ceiling sits far above production and the sequence does not matter.
What the importer plans on
The other end of the corridor faces the mirror problem. An importer that sources a third of its supply through 1 corridor has a supply distribution with 2 regimes: the normal year, and the year the corridor's capacity is its second-best route. Planning on the average of those is planning on a year that does not occur.
The practical move is to price the second-best route in advance. For an exporter, that means knowing the overland ceiling, the storage capacity, and the loss rates before the harvest, and knowing which tons go first when the ceiling binds. For an importer, it means holding stock or alternative supply equal to the gap between the primary route and the second-best route for the months the gap is likely to last, and booking that stock as the cost of the corridor rather than as excess inventory.
Insurance markets already price this way: CNN reported that the Joint War Committee extended its high-risk area to the whole Black Sea region outside certain territorial waters. The planning model should move before the premium does.
A corridor is worth its second-best route. Everything above that is the normal year, and the normal year is not the one that needs a plan.