Uncertainty hangs over Black Sea Grain deal renewal while Ukraine’s cereal crops decline
22 Feb 2023 --- As the war's first anniversary in Ukraine looms later this week, the Black Sea Grain initiative is up for renewal in March, sparking fresh debate on the next steps in this vital food supply shipping out key crops to markets depending on wheat and corn.
The grain deal was brokered by the United Nations and Turkey in July 2022 and allowed grain to be exported from three Ukrainian ports. It was extended by 120 days last November and is coming up for review in less than a month (March 18).
Tackling tight food supply chains in nations facing famine is a vital part of the deal.
“More than 21.3 million tons of grain and food products have been moved so far during the initiative, helping to bring down global food prices and stabilizing markets,” Stephane Dujarric, UN spokesperson, said.
Any delay that comes from this new negotiation, or disagreement leading to Ukrainian ports being blockaded, as has previously happened, would be “catastrophic”, particularly in Africa.
Earlier this month, Russian Deputy Foreign Minister Sergey Vershinin called an extension of the deal “unreasonable,” as there has not been a “real removal of sanctions restrictions from Russia’s agriculture exports.”
Furthermore, he qualified the deal’s implementation as “unsatisfactory” as only 3% of the products delivered through the grain initiative have ended in countries in need (Somalia, Yemen, Sudan, Afghanistan and Djibouti).
Russia and Ukraine agreed in November that grain should mainly go toward the poorest nations.
However, Russian authorities were also reluctant during previous renewals but ended up signing an extension anyway.
It’s hoped that is exactly what will happen in March.
21.3 million tons of grain and food products have been moved so far during the initiative.Nonetheless, an extension of the deal would not guarantee the normal flow of commodities from Ukrainian ports toward global markets as Russia has been accused of delaying transit inspections of ships, which has limited the flow of goods.
Ukraine’s agriculture outlook
Ukraine farmers will not be able to maintain the production and export capacity attained in 2022.
“Signed in July 2022, the Black Sea agreement enabled the safe passage of Ukraine grain exports through three ports. That and ample corn and wheat stocks allowed Ukraine to export a larger combined volume of the two crops than the five-year average in September and October. In December, Ukraine was able to export more than 3 million metric tons of corn, the largest since the beginning of the war, and 1.6 million metric tons of wheat,” says the US Department of Agriculture.
“The Black Sea Grain Initiative has increased the opportunities for Ukrainian grain to leave the country and has relieved some price pressures internationally, but uncertainty remains as the agreement is set to expire in mid-March 2023 and may not be extended,” the body notes.
However, as stocks return to normal levels, Ukraine will be unable to maintain its high export capacity.
In Ukraine, the best-case scenario, according to the Ukraine Grain Association, forecasts a decline in production to around 50 million metric tons of grain, down 17 million metric tons in a year.
Moreover, farmers are producing grain at a loss and cutting planting areas.
Russian agriculture outlook
According to the USDA, Russia is set to export a record 43.5 million metric tons of wheat during the 2022/2023 agricultural year that ends in June. Between February 15 and June 30, Russia is set to export 25.5 million metric tons of grain, compared to last year’s 11 million metric tons.
Putin explained yesterday that Russia would scale exports of cereals to 55-60 million metric tons by the end of the agricultural year.
Amid record export prospects, Russian authorities criticize that the EU is not effectively lifting up sanctions on food and fertilizer exports. Ukraine farmers will not be able to maintain the production and export capacity attained in 2022.
“We continue [the UN] our efforts to fully implement the rest of the memorandum of understanding, especially including on the issue of ammonia and on the issue of the exports of Russian grain and fertilizer,” noted Dujarric.
The UN stated last year that there will be no solution to the food crisis without reintegrating Russia and Ukraine into markets.
China ramps up imports
This February, data until today, China has racked up 1.3 million metric tons of food commodities through the Black Sea Grain Initiative. In comparison, the entire continent of Africa has received 290,000 metric tons of food.
There has only been one ship outbound this month toward Somalia, Yemen, Sudan, Afghanistan and Djibouti. The single ship left Odessa’s port carrying 25,000 metric tons of wheat to Afghanistan.
The UN’s latest data puts China as the biggest winner of the Black Sea food corridor, receiving 4.6 million metric tons of food, followed by Spain with 3.8 million metric tons, Turkey with 2.5 million metric tons and Italy with 1.6 million metric tons. In Africa, the largest importer is Egypt, with 791,400 million metric tons of imported food.
By Marc Cervera
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