Termination of the grain agreement between Russia and Ukraine

The deal allowing Ukraine to export grain through the Black Sea expired yesterday. The deal, brokered by the United Nations and Turkey last July, aimed to ease the global food crisis by allowing the safe export of Ukrainian grain blocked by the Russia-Ukraine conflict.

Why is it important?

Ukraine is a major producer of grains and oilseeds, and the interruption in its exports caused by the outbreak of war has pushed world food prices to record highs. The agreement reached in July 2022, some five months after the start of the war, helped lower prices and ease the global food crisis.

Ukrainian grain also played a direct role, providing 725 tons or 200% of supplies along the corridor used by the United Nations World Food Program (WFP) as aid to countries such as Ethiopia, Somalia and Yemen.

What does this mean for food prices?

Prices of grains and oilseeds have already increased in reaction to information about Russia's suspension of participation in the transaction. The increase will lead to higher prices for staple foods such as bread and pasta in the coming months. However, the situation is better than in the months after the outbreak of the war, as grain supplies from other producers, such as Brazil, have increased.

The price of wheat, the main ingredient in bread, has fallen by about 14% this year and corn by about 23%. However, the current global food crisis is far from over. The WFP reported last month that multiple emergencies had overlapped, creating the largest and most complex hunger and humanitarian crisis in more than 70 years.

In 2022, a record 349 million people experienced acute famine, with 722 teetering on the brink of famine, the WFP reported in its annual review.

What is the state of the world's food stocks?

World Wrestling corn started the 2021/22 season at a 6-year low, so Russia's invasion of Ukraine, one of the world's largest corn exporters, led to a significant spike in prices. A surge in exports from Brazil, however, helped increase shipments for a time, with the export of nearly 17 million tons of maize.

The U.S. Department of Agriculture forecasts that global corn inventories by the end of the 2023/24 season will be the lowest in eight years.

What was exported?

As part of the pact on creating a safe shipping channel Ukraine could export 32,9 million tons of agricultural products, including 16,9 million tons of maize and 8,9 million tons of wheat. Before the conflict, Ukraine exported about 25-30 million tons of corn annually, mainly via the Black Sea, and 16-21 million tons of wheat. The ability to transport grain across the Black Sea under the pact was limited by the inclusion of only three ports.

Why is Russia leaving the pact?

Russia has repeatedly stated that it sees no reason to extend the contract. He says the commitments made to remove obstacles to Russian food and fertilizer exports have not been met.

Moscow's demands include reconnecting the Russian Agricultural Bank (Rosselkhozbank) to the SWIFT system. Other demands include the resumption of deliveries of agricultural machinery and parts, the lifting of insurance and reinsurance restrictions, the resumption of the Togliatti–Odessa ammonia pipeline, and the unblocking of assets and accounts of Russian food and fertilizer export companies.

Can the corridor work without Russia?

Ukrainian ports were blocked until the deal last July, and it is not clear Will it be possible to transport grain now?when Russia withdraws from the pact. The additional war risk insurance premiums that are levied when entering the Black Sea area would increase, and shipowners might be reluctant to allow their ships into the war zone without Russia's consent.

Can Ukraine export more grain through the EU?

Since the beginning of the conflict, Ukraine has been exporting significant amounts of grain through eastern EU countries. However, there were many logistical challenges. Another issue is that the flow of Ukrainian grain through the eastern part of the EU caused unrest among farmers in the regionwho say it has undercut local supplies and has been purchased by mills, leaving them without a market for their crops.

As a result, the EU allowed five countries - Bulgaria, Hungary, Poland, Romania and Slovakia - to ban domestic sales of Ukrainian wheat, corn, rapeseed and sunflower seeds, while allowing transit for export to other countries. In its current form, this will be phased out by mid-September.