Known as the world’s “breadbasket”, Ukraine grows far more wheat than it consumes, and its exports contribute to global food security, especially in African countries now worried about food shortages.
Sergei Subinsky | AFP | Getty Images
Wheat prices rose on Thursday after Russia threatened to treat ships bound for Ukrainian ports as military cargo ships, adding to concerns about a global food security crisis.
This marked the third day in a row that prices rose. The most-active wheat contract on the Chicago Board of Trade was last up about 1.4% at 737.6 cents a bushel, a three-week high.
Shares rose 8.5% in the previous session, their biggest one-day gain in more than a year, amid heightened geopolitical tensions. Wheat prices, however, remain well below their peak of 1,177.5 cents a bushel reached last May.
It follows the Kremlin’s decision on Monday to withdraw from the Black Sea Food Initiative, a crucial wartime agreement that provides a maritime humanitarian corridor for Ukrainian grain exports.
UN Secretary-General Antonio Guterres explain He “deeply” regretted Russia’s decision to end the initiative, effectively ending a “lifeline” for hundreds of millions of people around the world facing hunger and those already struggling with rising food costs.
EU foreign policy chief Joseph Borrell said on Thursday that Russia’s decision to withdraw from the pact would jeopardize global food security.
“We already know that this will create a huge food crisis around the world,” Borrell said on Thursday ahead of a meeting of EU foreign ministers.
Attack on Grain Docks
russian army has There have been massive missile and drone attacks on ports and food infrastructure in southern Ukraine in recent days.
Institute for War Research explain On Wednesday, it argued that the latest attack could reaffirm Russia’s opposition to extending the Black Sea grain deal and hamper Kiev’s ability to export agricultural products.
Recent attacks on the southern Ukrainian port of Odessa and other cities have destroyed 60,000 tons of food and vital infrastructure, Ukraine’s Agriculture Ministry said on Wednesday.
Western and Ukrainian officials have accused Russia of essentially attacking everyone who depends on Ukraine’s food exports and putting vulnerable groups at risk. Most of Ukraine’s grain and food products are sold to countries in Africa and the Middle East.
Ukrainian rescuers work in a destroyed administration building in the center of Odessa under a missile attack during the Russian invasion of Ukraine, July 20, 2023.
Alexander Jimanov | AFP | Getty Images
Moscow warned that from Thursday all ships sailing to Ukrainian ports would be considered “on the side of the Kiev regime involved in the Ukrainian conflict”, further escalating tensions.
Russian President Vladimir Putin has said the country will immediately restore the international food deal if its demands are met. These include the lifting of restrictions that restricted full shipments of the country’s grain and fertilizer exports, and ending sanctions on Russia’s Agricultural Bank.
Since its signing last July, the Black Sea Food Initiative has allowed more than 32 million tons of grain commodities to be exported to 45 countries around the world from three Ukrainian Black Sea ports — Odessa, Chernomorsk and Pivdeny (formerly known as Yuzhny), according to U.N. estimates.
‘Supply is under further pressure’
The U.N. said the deal played an “indispensible role” in global food security, while analysts said Says it supports price stability and prevents shortages in developing countries. However, investors have been bracing for the cancellation of the plan.
“Ukraine will now be forced to export most of its grains and oilseeds through its land borders and Danube ports. This will significantly drive up transport costs and put further pressure on Ukrainian farmers’ margins,” Carlos Mera, head of agricultural markets at Rabobank, said on Monday.
“The knock-on effect of this could be to push them to plant less next season, putting further pressure on future supply,” he added.
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.