On July 16, 2023, Stavropol Krai, Russia, one of the most important farmlands in Russia, farmers use harvesting vehicles to harvest grain.
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Russia pulled out of a crucial wartime pact that allowed Ukraine to export grain through the Black Sea, reigniting concerns about global food security, with analysts calling the initiative’s failure both an inevitable setback and a blow to markets. blow.
Hours before the agreement expired, Russia said on Monday that it would not renew the Black Sea Food Initiative.
The deal, brokered by Turkey and the United Nations following Moscow’s all-out invasion of Ukraine last July, is a rare diplomatic breakthrough aimed at averting a global food crisis.
“Today is the last day of the grain agreement,” Kremlin Dmitry Peskov said. “Russia will return to the agreement when the corresponding parts in favor of Russia’s interests are fulfilled.”
The Black Sea grain program has repeatedly been briefly extended amid Russia’s growing displeasure with restrictions limiting the overall dispatch of its own grain and fertilizer exports.
Russian President Vladimir Putin reiterated these complaints during a phone call with South African President Cyril Ramaphosa over the weekend, Sputnik reported. Kremlin’s Google Translate report – The main goal of supplying food to countries in need, including those on the African continent, has not been achieved.
Wheat, corn and soybean prices all rose on the news. Wheat futures rose 3% on Monday to hit a high of 689.25 cents a bushel, the highest level since the contract traded as high as 706.25 cents on June 28.
Wheat prices, however, remain well below their peak of 1,177.5 cents a bushel reached last May.
Corn futures surged to a high of 526.5 cents a bushel, while soybean futures soared to a high of 1,388.75 cents a bushel.
On April 10, 2023, a bulk carrier docked at a grain terminal in the port of Odessa, Ukraine.
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Simon J. Evenett, an expert on global trade and professor of economics at the University of St. Gallen, said Monday that Russia’s withdrawal reflected “a fatal veto for a deal that is in its final stages.” one strike”.he quote Shipments have been steadily declining so far this year, according to UN shipping data.
“The termination of the Black Sea agreement is a blow to countries that source cheaper Ukrainian wheat. As long as it doesn’t trigger a massive export ban, the termination of the agreement is a minor distraction,” Evannett said by email.
“What matters going forward is whether Russia weaponsize its wheat exports,” he added. “During the last and current harvest cycles, Russia was the world’s largest supplier, exporting around 45 million tonnes.”
Evannett said market participants should keep an eye on the prospect of Moscow raising export taxes, as it could raise food prices further and help the Kremlin fund its military operations in Ukraine.
‘Indispensable role’ in global food security
The Black Sea Food Initiative has allowed more than 32 million tons of food commodities since it was signed last July, the United Nations said. exit From three ports on the Black Sea in Ukraine – Odessa, Chernomorsk and Pivdeny (formerly known as Yuzhny) – to 45 countries around the world.
It is for this reason that UN Secretary-General António Guterres described the agreement as “aindispensable role“In terms of global food security.
Guterres explain In early July, the agreement “must continue” as conflict, the climate crisis, energy prices and other factors disrupt food production and food affordability, while 258 million people in 58 countries around the world face hunger.
Russian President Vladimir Putin meets with soldiers at the Kremlin in Moscow, June 27, 2023.
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While investors have been bracing for a cancellation of the deal, Russia’s withdrawal is a “shock” for markets, Rabobank’s head of agricultural markets Carlos Mera said on Monday.
Mera said the move supported price stability and prevented shortages in developing countries.
“Ukraine will now be forced to export most of its grain and oilseeds through its land borders and Danube ports. This will significantly increase transport costs and put further pressure on Ukrainian farmers’ profits,” he added.
“The knock-on effect of this is that it may prompt them to plant less next season, putting further pressure on future supply.”
Ultimately, the development means that low-income countries in Africa and the Middle East may become more reliant on Russian wheat, which accounts for more than 20 percent of global wheat exports, Mehra said.
— CNBC’s Ruksandra Yodash contributed to this report.