EXPLAINER: What Russia’s suspension of grain deal could mean
Oct 31, 2022, 6:05 AM | Updated: Nov 1, 2022, 1:02 am
(AP Photo/Khalil Hamra, File)
NAIROBI, Kenya (AP) — Russia has suspended its part of a U.N.-brokered deal allowing Ukraine to export grain safely from its Black Sea ports during a monthslong war, saying it was not going to allow ships to travel.
Ukraine said a dozen ships had sailed Monday after initially reporting that more than 200 vessels, many loaded and ready to travel, were stuck after Russia’s weekend announcement. Later in the day, Russia’s Defense Ministry said ship traffic was suspended, calling the movement “unacceptable” after Moscow alleged a Ukrainian drone attack against its Black Sea fleet.
Such exports are crucial: Ukraine and Russia are key global suppliers of wheat, barley, sunflower oil and other food to countries in Africa, the Middle East and parts of Asia where many are already struggling with hunger.
Here is what Russia’s decision could mean for a world increasingly worried about food security and high food prices:
WHAT HAS THE DEAL ACHIEVED?
The grain initiative has been a rare example of cooperation between Ukraine and Russia since Russia’s invasion in February. Brokered by the United Nations and Turkey, it has allowed more than 9 million tons of grain in 397 ships to safely leave Ukrainian ports.
The grain agreement has brought down global food prices about 15% from their peak in March, according to the U.N., and the U.N. secretary-general had urged Russia and Ukraine to renew the deal when it expires Nov. 19.
Following Russia’s announcement, wheat futures prices jumped 5% on Monday in Chicago. With global markets tight, poorer countries will have to pay more to import grain, said Joseph Glauber, senior research fellow at the International Food Policy Research Institute in Washington.
Before the grain deal was brokered, the U.S. and Europe accused Russia of starving vulnerable parts of the world by denying exports. Since the deal, Russian President Vladimir Putin has alleged that most of the exported grain was going to Europe instead of the world’s hungriest nations.
U.N. humanitarian chief Martin Griffiths said 23% of the total cargo exported from Ukraine under the grain deal has gone to lower- or lower-middle-income countries and 49% of all wheat shipments have gone to such nations.
Ukraine has said more than 5 million tons have been exported to African and Asian nations, with 190,000 tons of wheat sent to countries that are getting relief from the U.N. World Food Program.
WHAT ABOUT SHIPS THAT RECENTLY LEFT UKRAINE?
A ship carrying 30,000 tons of wheat for Ethiopia under that program sailed Monday, Ukraine said, one of a dozen ships with more than 354,000 tons of agricultural products that Ukraine said left port after the U.N. and Turkey agreed on the traffic of ships through the humanitarian corridor. Ethiopia, along with neighboring Somalia and Kenya, is badly affected by the region’s worst drought in decades.
Russia’s U.N. ambassador, Vassily Nebenzia, said at an emergency meeting of the U.N. Security Council called Monday by Moscow that “the Black Sea remains an area of hostilities” and “we cannot allow an unimpeded passage of vessels without our inspection.”
Nebenzia said Russia opposed the decision by the U.N., Ukraine and Turkey to allow ships to pass without Russian inspection. Moscow would soon reveal measures to control what was allowed “without our consent,” he added.
William Osnato, a senior research analyst with agriculture data and analytics company Gro Intelligence, said ship tracking maps don’t show any vessels heading toward Odesa.
WHAT HAPPENS NOW?
Russia has offered to supply up to 500,000 tons of grain “to the poorest countries free of charge in the next four months.” The Russian Defense Ministry stressed that Russia is not withdrawing but suspending the grain agreement.
While sanctions on Russia don’t affect its grain exports and a parallel wartime deal was meant to clear the way for Moscow’s food and fertilizer shipments, some businesses have been wary.
Developing nations will have to find new grain suppliers and pay more from countries such as the U.S., Argentina and Australia, where dry conditions or rain are posing problems, said Glauber, a former chief economist at the U.S. Department of Agriculture. But high prices mean producers will plant more, and those that are not typically big wheat exporters, like Brazil and India, have increased shipments.
“What the world needs are some really big crops,” he said, and with Ukraine having accounted for 10% of world wheat exports, “that’s a big hole” to fill.
WHAT ELSE AFFECTS FOOD SUPPLY?
Peter Meyer, head of grain and oilseed analytics at S&P Global Platts, said he doubts that Russia’s decision will have a lasting impact on the price and supply of corn and grain. Commodity traders were skeptical that the deal would last, he said, one reason that corn prices have gone up, not down, since the arrangement was reached in July.
Grain markets also are focused on other issues, Meyer said, including low water levels in the Mississippi River that slow the export of U.S. farm products, a disappointing corn crop in the American West and the threat of a U.S. rail strike.
But in parts of the African continent, where prices have remained high, concerns are rising again.
“This will send another mini shockwave through the markets, and I think it will lift prices for a while,” said Shaun Ferris, a Kenya-based adviser on agriculture and markets for Catholic Relief Services, a partner in World Food Program distributions. “This will mean that prices in East Africa, at record highs, are not going to come down anytime soon.”
After four failed rainy seasons in the Horn of Africa, millions of people are hungry and millions of livestock that are a critical source of food and wealth are dying. Ferris said he’s spoken with companies that are sending hundreds of tons of processed feeds to northern Kenya to keep animals alive.
The latest setback in Ukrainian exports is another layer of stress, he said.
In poorer North African and Middle Eastern countries where bread is a critical part of people’s diets, there may not be alternative staples like rice in Asia or sorghum elsewhere in Africa, Glauber said. That raises the specter of turmoil in places where bread prices fueled the Arab Spring uprisings.
In Egypt, the world’s largest wheat importer, President Abdel Fattah el-Sissi personally visited wheat farms when the harvest started this spring. But an economic crunch has made it more difficult to buy imported wheat, as Egypt’s currency has reached an all-time low against the U.S. dollar.
“The wheat’s out there, but it’s just going to come at a high price,” Glauber said.
Bonnell reported from London. AP reporters Paul Wiseman in Washington, Hanna Arhirova in Kyiv, Ukraine, and Edith M. Lederer at the United Nations contributed.
Follow all of AP’s coverage on the food crisis at https://apnews.com/hub/food-crisis and the war in Ukraine at https://apnews.com/hub/russia-ukraine.
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