60 more days: Black Sea grain to keep flowing as Russia offers shorter extension
14 Mar 2023 --- As the Black Sea Grain Initiative is set to expire this Saturday, Russia has reportedly offered a second extension to the deal to allow the flow of food commodities through Turkey toward global ports. This will bolster food security and solidify the eleven month streak of declining food prices, which are now 18.7% lower than in March 2022, according to the UN Food and Agriculture Organization (FAO).
However, Oleksandr Kubrakov, VP for the Restoration of Ukraine, pointed out that the initial agreement signed by all parties – Ukraine, Russia, Turkey and the UN – only allows for a 120 days extension.
Nonetheless, Kubrakov stated that Ukraine authorities would wait for the official position of the UN, which expressed hours later that it remains “totally committed” to the Black Sea Grain Initiative and to the “efforts to facilitate the export of Russian food and fertilizer,” according to UN spokesperson Stephane Dujarric.
A final agreement on the shorter extension is set to be brokered in the next few days.
According to the UN, the Black Sea Grain Initiative has allowed the export of 24.22 million metric tons of grain and over 1,600 secure vessel voyages.
Of the shipped food, 49% was corn, 27% wheat, 10% sunflower oil and meal and 13% other foods such as soya beans, rapeseed and peas.
The international body highlights that the 11 consecutive months of global food commodity prices decline “clearly demonstrate the positive impact of both agreements on global food prices.”
“The continuation of the Black Sea Grain Initiative is crucial for global food security, as grain and fertilizer prices and availability have not returned to pre-war levels, causing hardship particularly in developing countries,” continues the body.
Moreover, the UN explains that 55% of food exports are going to developing countries.
While 55% is going toward developing countries, under the first extension Russia sought assurances that more grain would flow to African nations.
However, in February, Russia categorized the deal as “unsatisfactory” as only 3% of the products delivered through the grain have ended in countries in need (Somalia, Yemen, Sudan, Afghanistan and Djibouti).
China has been the biggest winner of the initiative, racking 5.2 million metric tons of food products, followed by the 4.2 million metric tons of Spain and the 2.7 million metric tons of Turkey. In Africa, the largest importer is Egypt, with 841,800 million metric tons of imported food.
This month, only two ships have been outbound for Africa, carrying 15,500 metric tons of barley and 25,000 metric tons of corn to Libya and 49,550 metric tons of wheat to Kenya. In comparison, only this month and so far, China has received 672,500 metric tons of food products, Spain 285,600 metric tons and Turkey 167,100 metric tons.
No money for imported food
This month no ship has sailed toward the five countries Russia pointed out to be in need. Furthermore, no boat has sailed to the countries that the WEF Global Risks Report of 2023 puts in simultaneous food and debt crises and that would benefit from cheap food imports – Tunisia, Ghana, Pakistan, Lebanon and Egypt.
Egypt, which imported 82% of its wheat before the war from Ukraine and Russia, spent US$5.7 billion only on wheat imports in 2022, according to the Food Policy Research Institute. The country was forced to take an IMF loan of US$3 billion in December.
Pakistan, which was also heavily reliant on Ukraine and Russian wheat, is also seeking an IMF loan as the country is running out of foreign currency for critical imports such as food. Pakistan suffered a cataclysmic monsoon in 2022 in its food-producing region of Sindh, with the WEF estimating 800,000 hectares of farmland being lost.
Lebanon, which imports 60% of its wheat, had two million people suffering some form of food insecurity in January, with the situation set to deteriorate to 2.26 million people in April, according to the UN.
“A three-year economic crisis which has seen the currency depreciate heavily, protective food subsidies lifted, and living costs rise dramatically, is preventing families from accessing enough food and other basic needs each day,” explains the body.
The Middle Eastern country has not been able to purchase any food product coming from the Black Sea Grain Initiative since November 2022, even as the nation faces 138% food inflation.
Barriers to food trade
Ukraine farmers in the war-torn country will be unable to maintain the production and export capacity attained in 2022. According to the Ukraine Grain Association, the best-case scenario forecasts a decline in production to around 50 million metric tons of grain, down 17 million metric tons in a year.
This could be compensated by a record prediction of Russia’s agricultural output. However, the Russian permanent mission to the UN explains that there are too many barriers for exporters.
The country calls for normalizing its agricultural exports, including bank payments, transport logistics, insurance, the unfreezing of financial activities and the supply of ammonia through the Togliatti-Odessa pipeline.
The UN stated last year that there would be no solution to the food crisis without reintegrating Russia and Ukraine into markets.
By Marc Cervera
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