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Market worries about Black Sea grain corridor

Ukraine says Russian inspections are delaying grain shipments, and it’s not certain the deal will be extended this month.
Wheat destined for Kenya and Ethiopa was loaded onto a ship in a Ukrainian port last month.

WESTERN PRODUCER — Joe Glauber has a good idea what will happen to grain prices if the Black Sea Grain Initiative is not renewed.

The former chief economist of the U.S. Department of Agriculture noted that world corn prices increased by six percent and wheat prices rose by three percent when Russia temporarily suspended the agreement in November 2022.

He told delegates attending the USDA’s 99th Annual Agricultural Outlook Forum that he expects a similar market response if there is no renewal of the agreement, which expires on March 18.

Glauber said it is remarkable that the United Nations was able to broker a deal to move Ukrainian grain through three Black Sea ports during an active war.

“The fact that we’ve gotten 22 million tonnes out through the Black Sea is just amazing,” he said.

Mykola Solski, minister of agrarian policy and food for Ukraine, said more than four million tonnes of grain were shipped through the corridor in October 2022, which is the maximum amount that can flow though the three ports.

But volumes started to decline after that due to Russia causing inspection delays. Only three million tonnes were shipped in January 2023 due to that “intentional sabotage,” he said.

“A permanent queue of more than 100 ships is constantly observed in the Bosporus (strait),” Solski said in a video message to the conference.

Glauber said all the grain shipped out of Ukraine’s Odessa ports must be inspected in Istanbul, Turkey, before heading to markets around the world.

That is creating huge additional export costs. Farmers are also shipping grain over land through the country’s western border. Those “solidarity lanes” are also adding about US$200 per tonne to shipping costs.

All those additional costs are passed down to farmers, so while growers in the rest of the world are enjoying sky-high prices, that is not the case in Ukraine.

That will result in reduced acreage in 2023. Wheat plantings will be down 35 to 40 percent compared to last year, said Glauber, who is a senior research fellow with the International Food Policy Research Institute.

He believes that 2023 will be worse than 2022 for Ukraine’s agriculture sector.

Solski said total cultivated area for all crops is expected to drop by 25 percent.

“A considerable amount of our land is polluted with explosives,” he said.

“It is deadly to work in these areas.”

Farmers are dealing with serious energy supply problems, damage to critical infrastructure and disrupted supply chains.

Caitlin Welsh, director of the global food security program for the Center for Strategic and International Studies, said more than 84,000 pieces of agricultural equipment have been partially or totally damaged.

Storage for more than nine million tonnes of grain has also been damaged.

She said the situation in Ukraine is contributing to a mounting global food crisis.

An anticipated 345.2 million people will be food insecure in 2023, a “staggering rise” of 200 million people compared to pre-COVID-19 levels, according to the World Food Programmed.

People are spending more on staple food products like wheat and vegetable oils and have less money to spend on nutritional foods.

In Egypt, 85 percent of the population is consuming fewer eggs and 75 percent are buying less meat. Instead, they are spending their money on potatoes and pasta.

That will lead to health problems like increased obesity and anemia, said Welsh.

Solski contends Russia is directly responsible for rising grain prices and increased global famine. Ukraine’s grain exports are expected to be down 10 to 20 million tonnes in 2022-23 due to the war.

He called on the United States to join the implementation of a large-scale program led by the World Bank aimed at providing Ukrainian farmers with low-rate loans.

He also asked for assistance in demining Ukraine’s farmland and support for the unblocking of the grain corridor.