Moscow seems intent on letting the Black Sea Grain Initiative expire next Monday, but the United Nations is equally resolved to preserve the deal and prevent food prices from rising in some of the poorest nations.
Without the UN-led deal that allows Ukraine to export commodities such as wheat, corn, barley and sunflower meal, global food prices will spike, and people in the poorest countries that depend on cheap commodities will suffer the most, Monika Tothova, an economist with the UN’s Food and Agriculture Organization, told Agri-Pulse.
Tothova said she doesn't expect global food prices to rise as sharply as they did last year when Russia invaded Ukraine and the country’s ag exports came to a virtual halt, but she said the impact would still be severe.
World food prices shot up 13% in March 2022 in response to the Russian invasion, according to an FAO analysis released in April. Food prices then began to decline. At the same time, Ukraine began exploring new ways to get its grain to foreign buyers.
Global food prices would likely stop their decline if the Black Sea Grain Initiative expires on Monday, said Lotanna Emediegwu, a lecturer in economics at Manchester Metropolitan University.
The end of the initiative could “reverse the progress made in stemming global food price inflation, although it does not seem that prices will rise as high as before July 2022,” he told Agri-Pulse. He stressed that developing countries will be affected disproportionately because they will “have to pay more for food import bills.”
The Black Sea Grain Initiative has allowed more than 32 million metric tons of ag commodities through three Odesa ports since it was signed about a year ago.
The initiative contributes “to sustained reductions in global food prices, which are now more than 23% below the record highs reached in March last year,” according to a statement released by a UN spokesman Friday. “The Secretary-General and his team remain fully committed to building on the progress already made and are in constant contact with a wide range of stakeholders in this regard. The Secretary-General calls on all concerned to prioritize global food security.”
Moscow increasingly argues that not enough Ukrainian grain is flowing to the most impoverished nations like Ethiopia, but that’s missing the point of the initiative, said Tothova. While higher-income countries like China, Spain and the Netherlands may be importing most of the Black Sea grain, having additional supplies on the market help make food more affordable.
“The fact that you are exporting from Ukraine means you are improving the supply and availability on the global market and you are decreasing prices for everyone, whether you are rich or poor,” Tothova said.
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Ukraine can continue to export some grain, even without the initiative. Ukraine began expanding alternative routes to ship its corn and wheat well before its Odesa ports were reopened, and the volumes going to river ports on the Danube as well as by train through Eastern European countries have grown substantially.
Ukraine has shipped as much as 3 million tons per month via those alternative routes, but that’s still less than half of what Ukraine has been able to ship from the ports of Odesa, Yuzhny (also called Pivdennyi) and Chornomorsk, said Joe Glauber, a senior research fellow at the International Food Policy Research Institute and former USDA chief economist.
A shutdown of the Odesa ports has actually started already, albeit slowly, as Moscow demonstrates its ire over Western sanctions on its Rosselkhozbank – or Russian Agricultural Bank – and Russia’s continued inability to export its ammonia.
Joe Glauber, IFPRIThe UN helped establish the Joint Coordination Center in Istanbul to allow inspectors from Ukraine, Russia and Turkey to clear vessels for entry into the Black Sea and exit after loading grain at a Ukrainian port. Fewer and fewer ships have been cleared for entry, and inspections stopped altogether on June 26.
“Russia has trimmed those exports (through Odesa ports) down to almost nothing over the last month or two, and it certainly looks like they are positioning themselves to terminate (the Black Sea Grain Initiative),” said Glauber.
Meanwhile, UN Under Secretary General for Humanitarian Affairs Martin Griffiths stressed there’s still hope to save the grain deal despite recent comments from Moscow.
“We hear repeated statements by the Russian Federation, saying that it’s been no advantage to them, and time’s up,” Griffiths said in a press conference Friday. “This doesn’t deter us from doing everything we can to work for renewal (of the Black Sea Grain Initiative).”
A major obstacle, though, will likely be the recent damage done to Russia’s pipeline that sends ammonia to the Ukrainian port of Pivdennyi. Ukraine shut down the pipeline – the primary avenue for Russian ammonia exports – but Russia continues to insist that Ukraine promised to reopen it in a separate, secret agreement that was signed at the same time as the Black Sea Grain Initiative.
Before the war “most of Russia’s ammonia exports were transported through Pivdennyi as alternate routes were very expensive,” according to an analysis by the International Food Policy Research Institute. “As a result, Russian exports of anhydrous ammonia in 2022, calculated using data from reporting importers, were down 71% in volume compared to 2021.”
Griffiths said the UN is asking Ukraine and Russia to allow safe passage for UN inspectors to assess the severity of damage to the ammonia pipeline.
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