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Bulk grain cargo ship TQ Samsun is anchored in the Black Sea near the entrance of the Bosphorus Strait in Istanbul, Turkey, Monday, July 17, 2023. Russia on Monday halted a breakthrough wartime deal that allowed grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat and high food prices have pushed more people into poverty. (Sercan Ozkurnazli/Dia Images via AP)

The suspension of the Black Sea Grain Initiative, announced by Russia on Monday, should have little immediate impact but is a cause for concern in the medium term.

Le Monde with AFP

Bulk grain cargo ship TQ Samsun is anchored in the Black Sea near the entrance of the Bosphorus Strait in Istanbul, Turkey, Monday, July 17, 2023. Russia on Monday halted a breakthrough wartime deal that allowed grain to flow from Ukraine to countries in Africa, the Middle East, and Asia where hunger is a growing threat and high food prices have pushed more people into poverty. (Sercan Ozkurnazli/Dia Images via AP)

On Monday, July 17, Russia announced the suspension of the Ukrainian grain export agreement. Kremlin spokesperson Dmitry Peskov announced without further details that the agreement, which has allowed the export of 33 million tons of grain since July 2022, would be operational again “when the part on the Black Sea concerning Russia is implemented.” This suspension should have little impact in the immediate term, when the northern hemisphere is harvesting, but will inevitably create tensions and inflation in the medium term.

Little immediate impact

The situation is very different from that of the end of February 2022, when Russia invaded Ukraine, closing the Black Sea to shipping – Ukraine’s main export route for agricultural products. At the time, Ukraine was the world’s leading exporter of sunflower oil and the fourth biggest exporter of wheat and corn.

The opening of the corridor on August 1, 2022, brought relief to importing countries, particularly in the Mediterranean and Africa, bringing down world prices, which had reached unprecedented levels in May.

In two years, Ukraine has seen its grain production almost halve, with forecasts of 25 million metric tons of corn and 17.5 million metric tons of wheat for 2023-2024, compared with 42 million metric tons of corn and 33 million metric tons of wheat in 2021-2022, according to the latest report from the US Department of Agriculture. “In 2023-2024, it is expected to export 6 million metric tons less wheat and 10 million metric tons less corn than in the previous season,” reported Gautier Le Molgat, an analyst at Agritel.

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The situation is less tense, because there is less product to export and because the northern hemisphere is in the middle of the harvest. “Future needs will become clearer at the end of the harvest. It’s a calm period on the markets, which have reacted very little to the suspension of the agreement,” with the price of wheat rising by less than 1% on Euronext, as Le Molgat noted.

What’s more, in recent months, “there has been a bottleneck in the Bosphorus, with very slow traffic,” due in particular to fewer Russian inspections of ships using the corridor, Edward de Saint-Denis, a broker at Plantureux & Associés, commented.

The limits of the land-based alternative

Even before the corridor was opened, the European Union set up solidarity lanes, land and river corridors designed to facilitate Ukrainian exports across Europe. The Farm Foundation, a think-tank on global agricultural issues, estimates that half of Ukrainian exports currently go through these routes, notably via Poland and Romania. “One of the questions is whether the EU, which has recovered 50% of Ukraine’s grain supply since the start of the conflict, has the capacity to re-export these volumes,” Olia Tayeb Cherif, head of research at Farm, observed.

The EU would like to improve overland supply, notably with a project to harmonize rail gauges at the borders between the European Union and Ukraine, but this will take time. “We’ll be able to increase the rate a little, but we won’t solve the problem for the volumes involved,” said de Saint-Denis.

Le Monde

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