The Russian-Ukrainian grain agreement extended in favor of food prices

The Russian-Ukrainian grain agreement extended in favor of food prices

A wartime deal that unblocked grain shipments from Ukraine and helped temper rising global food prices will be extended for another four months, the United Nations announced on Thursday.

The extension of the deal aims to prevent a price shock in some of the world’s most vulnerable countries where many are struggling with hunger.

Ukrainian President Volodymyr Zelenskyy called the 120-day extension “a key decision in the global fight against the food crisis”.

The deal, struck during Russia’s war in Ukraine, establishes a safe Black Sea shipping lane and inspection procedures to address concerns that cargo ships might carry weapons or launch attacks.

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Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov signed separate agreements with UN Secretary General Antonio Guterres and Turkish Defense Minister Hulusi Akar. The ceremony took place in the presence of Turkish President Recep Tayyip Erdogan.

“Today there is a lighthouse on the Black Sea,” said António Guterres. “A glimmer of hope, a glimmer of possibility, a glimmer of relief in a world that needs it more than ever.”

A garbage dump unloads grain into a granary in the village of Zghurivka, Ukraine, August 9, 2022.
(AP Photo/Efrem Lukatsky, File)

Although Western sanctions against Russia for its invasion of Ukraine did not target food exports, many shipping and insurance companies were reluctant to deal with Moscow, either refusing to do so or dramatically increasing the price.

The UN has worked to resolve issues related to insurance, access to ports, financial transactions and navigation for Russian vessels, according to a UN official who was not authorized to speak publicly and spoke on condition of anonymity. The manager said that the insurance issue has mostly been resolved in the past few days.

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Ukraine and Russia are the world’s main suppliers of wheat, barley, sunflower oil and other foods to countries in Africa, the Middle East and parts of Asia where millions of poor people lack food.

Russia was also the world’s largest fertilizer exporter before the war. The loss of these supplies following Russia’s February 24 invasion of Ukraine had driven up global food prices and fueled fears of a hunger crisis in poorer countries.

While the extension prevents a price shock in developing countries that spend far more on food and energy than wealthier countries, drought threats persist in places like Somalia and weakening currencies around the world , which makes the purchase of imported grain more expensive.

“I welcome the agreement of all parties to continue the Black Sea Grain Initiative to facilitate safe navigation of grain, food and fertilizer exports from Ukraine,” said António Guterres. in a press release.

The Turkish Defense Ministry said the decision to extend the deal came after two days of talks in Istanbul between delegations from Turkey, Russia, Ukraine and the UN that took place in an atmosphere ” positive and constructive.

Cargo ships anchored in the Sea of ​​Marmara wait to cross the Bosphorus Strait in Istanbul, Turkey, Tuesday, November 1, 2022.

Cargo ships anchored in the Sea of ​​Marmara wait to cross the Bosphorus Strait in Istanbul, Turkey, Tuesday, November 1, 2022.
(AP Photo/Khalil Hamra)

Russia had expressed dissatisfaction with the deal facilitating Russian grain and fertilizer exports, hinting it might not approve an extension and even briefly suspend its part of the deal late last month. He cited risks to his ships following what he claimed was a Ukrainian drone attack on Russia’s Black Sea Fleet.

Guterres also said the UN was “fully committed to removing remaining obstacles to the export of food and fertilizer from (Russia)” – part of the deal that Moscow considers critical.

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Russia has offered to donate 260,000 metric tonnes of fertilizer stockpiled in European ports to farmers in developing countries who have been shut out of the fertilizer market due to shortages, and the official says the first ship is expected to leave the Netherlands on Monday for Mozambique. , where the fertilizer will go overland to Malawi. Further deliveries are expected from Belgium and Estonia, the official said.

The Russian Foreign Ministry said Moscow had allowed the extension to take effect “without any changes in terms and scope”. He said Russia had noted the “intensification” of UN efforts to speed up Russian exports.

“All of these issues must be resolved within 120 days for which the ‘package’ is extended,” the ministry said.

A ship under the Kerch Bridge blocks passage to the Kerch Strait near Kerch, Crimea, Sunday, November 25, 2018.

A ship under the Kerch Bridge blocks passage to the Kerch Strait near Kerch, Crimea, Sunday, November 25, 2018.
(AP Photo)

During the expansion talks, the parties discussed possible additional measures to “deliver more grain to those who really need it”, the ministry added, apparently in response to Russian complaints that most grain ended up in richer countries.

Turkish President Recep Tayyip Erdogan suggested on Thursday that wheat from Russia could be made into flour in Turkey and shipped to needy African countries.

UN humanitarian aid chief Martin Griffiths said last month that 23% of Ukraine’s exports under the grain deal went to lower- and lower-middle-income countries and that 49% % of all wheat shipments were destined for these countries.

Markets were pleasantly surprised by the extension, said Ian Mitchell, co-director of the Europe program at the Center for Global Development, which specializes in agriculture and food security. Following the announcement, wheat futures prices fell 2.6% in Chicago.

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“Ukraine and Russia are such major grain exporters that the rest of the market cannot fully replace the complete lack of Ukrainian grain,” he said. “So this deal will have a significant impact on food prices, even if volumes are not what they were before the invasion.”

However, he said the uncertainty was “unnecessary in this deal”. Towards the end of the four-month extension, markets “will price in the risk of it not being extended, and prices will rise again a bit.”

Arnaud Petit, executive director of the International Grains Council, said the Black Sea region produces some of the cheapest wheat in the world and securing these supplies prevents a price shock for developing countries.

A security guard stands next to the Navi-Star ship which has been full of grain since Russia began its invasion of Ukraine five months ago as it waits to leave the seaport of Odessa , in Odessa, Ukraine on Friday, July 29, 2022.

A security guard stands next to the Navi-Star ship which has been full of grain since Russia began its invasion of Ukraine five months ago as it waits to leave the seaport of Odessa , in Odessa, Ukraine on Friday, July 29, 2022.
(AP Photo/David Goldman)

There have been good harvests in the region, contributing an additional 10 million tonnes of wheat globally compared to last year, he said. The extension means Ukrainian farmers can plan to plant.

Petit called the extension a building block in “a volatile region where things can change on a daily basis.”

However, when it comes to food prices, the trade move is not as significant as currencies around the world weaken against a strong US dollar, in which the prices of commodities like wheat and other cereals are being evaluated, said Petit.

The board calculated that for Ghana, which imports its wheat primarily from Canada, the price of wheat in Canadian dollars has been largely stable for the past two years. But changing to local currency resulted in a 70% price hike.

World food prices fell by around 15% from their peak in March after the adoption of the cereals initiative in July.

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“With over 11 million tonnes of grain and food delivered to those in need via approximately 500 vessels over the past four months, the importance and benefits of this agreement for food supply and security of the world have become evident,” Turkey said. Erdogan said.

The Associated Press contributed to this article.

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