Russia-Ukraine grain deal extends to boost food prices

A war deal that unblocked grain shipments from Ukraine and helped moderate rising global food prices will be extended by four months, the United Nations said Thursday.

The extension of the agreement aims to avoid a price shock in some of the world’s most vulnerable countries where many struggle with hunger.

Ukrainian President Volodymyr Zelenskyy called the 120-day extension a “key decision in the global fight against the food crisis.”

The deal, struck during Russia’s war in Ukraine, establishes a safe shipping corridor in the Black Sea and inspection procedures to address concerns that cargo ships could carry weapons or launch attacks.

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Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov signed separate agreements with UN Secretary-General Antonio Guterres and Turkish Defense Minister Hulusi Akar. The ceremony was witnessed by Turkish President Recep Tayyip Erdogan.

“Today there is a lighthouse in the Black Sea,” Guterres said. “A beacon of hope, a beacon of possibility, a beacon of relief in a world that needs it more than ever.”

A dump truck unloads grain into a barn in the village of Zghurivka, Ukraine, on August 9, 2022.
(AP Photo/Efrem Lukatsky, file)

Although Western sanctions against Russia over its invasion of Ukraine did not target food exports, many shipping and insurance companies were reluctant to deal with Moscow, even refusing to do so or by greatly increasing the price.

The United Nations has been working to overcome problems related to insurance, access to ports, financial transactions and the dispatch of Russian ships, according to a U.N. official who was not authorized to speak publicly and spoke under condition of anonymity. The official said the insurance issue has mostly been resolved in the past few days.

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Ukraine and Russia are key global suppliers of wheat, barley, sunflower oil and other foods to countries in Africa, the Middle East and parts of Asia where millions of impoverished people do not have enough to eat.

Russia was also the world’s leading exporter of fertilizers before the war. The loss of those supplies following Russia’s February 24 invasion of Ukraine had sent world food prices soaring and fueled concerns of a hunger crisis in poorer countries.

While the extension averts a price shock in developing countries that spend far more on food and energy than wealthier countries, threats of droughts in places like Somalia and weakening currencies around the world persist, which makes buying imported grains more expensive.

“I welcome the agreement of all parties to continue the Black Sea Grain Initiative to facilitate the safe navigation of Ukraine’s grain, food and fertilizer exports,” Guterres said in a statement.

The Turkish Defense Ministry said the decision to extend the agreement came after two days of talks in Istanbul between delegations from Turkey, Russia, Ukraine and the UN that were held in a “positive and constructive” atmosphere “.

Cargo ships anchored in the Sea of ​​Marmara wait to cross the Bosphorus Strait in Istanbul, Turkey, Tuesday, November 1, 2022.
(AP Photo/Khalil Hamra)

Russia had expressed dissatisfaction with the deal facilitating Russian grain and fertilizer exports, hinting it might not approve an extension and even briefly suspended its part of the deal late last month. It cited risks to its ships after what it alleged was a Ukrainian drone attack on Russia’s Black Sea fleet.

Guterres also said the UN is “fully committed to removing the remaining obstacles to (Russia’s) food and fertilizer exports,” a part of the deal that Moscow sees as critical.

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Russia has offered to donate 260,000 metric tons of fertilizer stored in European ports to farmers in the developing world who have been priced out of the fertilizer market because of shortages, and the official said the first ship is planned to leave the Netherlands for Mozambique on Monday. , where the fertilizer will go by land to Malawi. More shipments are expected from Belgium and Estonia, the official said.

The Russian Foreign Ministry said Moscow had allowed the extension to take effect “without any changes in terms and scope”. He said Russia noted the “intensification” of UN efforts to speed up Russian exports.

“All these issues must be resolved within 120 days for which the ‘pact’ is extended,” the ministry said.

A ship under the Kerch Bridge blocks passage in the Kerch Strait near Kerch, Crimea, Sunday, Nov. 25, 2018.
(AP photo)

During talks on the extension, the sides discussed possible additional measures to “deliver more grain to those who need it,” the ministry added, apparently to address Russian complaints that most of the grain has ended up in richer nations .

Turkish President Recep Tayyip Erdogan suggested on Thursday that wheat from Russia could be turned into flour in Turkey and sent to African nations that need it.

UN humanitarian chief Martin Griffiths said last month that 23 percent of Ukraine’s exports under the grain deal went to low- and middle-income countries and 49 percent of all wheat shipments have gone to these nations.

Markets were pleasantly surprised by the extension, said Ian Mitchell, co-director of the Center for Global Development’s Europe program, which specializes in agriculture and food security. After the announcement, wheat futures prices fell 2.6% in Chicago.

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“Ukraine and Russia are such important grain exporters that the rest of the market cannot completely replace the complete absence of Ukrainian grain,” he said. “So this deal will significantly affect food prices, even if the volumes are not what they were before the invasion.”

However, he said uncertainty is “unhelpful in this deal.” Towards the end of the four-month extension, markets “will trade on the risk that it hasn’t widened, and prices will go back up a bit.”

Arnaud Petit, executive director of the International Grains Council, said the Black Sea region produces some of the cheapest wheat in the world and securing those supplies prevents a price shock in developing countries.

A security guard stands next to the Navi-Star ship that has been full of grain since the Russian invasion of Ukraine began five months ago as it waits to sail from the Odessa seaport in Odessa, Ukraine, Friday, 29 July 2022.
(AP Photo/David Goldman)

There have been good harvests in the region, contributing to 10 million tonnes more wheat worldwide compared to last year, he said. The extension means Ukrainian farmers can plan to plant.

Petit said the expansion was a key element in “an unstable region where things can change every day.”

However, for food prices, the trade move is not as significant as currencies around the world weakening against a strong US dollar, which trades commodities such as wheat and other cereal, Petit said.

The council calculated that for Ghana, which mainly imports its wheat from Canada, the price of wheat in Canadian dollars has remained virtually stable for two years. But the change to the local currency resulted in a 70% increase in prices.

World food prices declined by around 15% from their peak in March following the adoption of the cereal initiative in July.

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“With the delivery of more than 11 million tons of grain and food to those in need via approximately 500 ships over the past four months, the importance and benefits of this agreement for the supply of food and the world’s security have become apparent,” Turkey said. Erdogan said.

The Associated Press contributed to this post.