Russia’s recent decision to end the Black Sea Grain Initiative, a wartime agreement that allowed Ukrainian grain to be exported across the Black Sea, has reignited concerns about global food security. The deal, mediated by Turkey and the UN in response to Moscow’s invasion of Ukraine, aimed to avert a global food crisis. However, Russia’s complaints about perceived restrictions on grain and fertiliser exports caused the initiative to fail. As a result, wheat, corn, and soybean prices skyrocketed, raising concerns about the global food supply’s stability.
The Black Sea Grain Initiative, which had been repeatedly extended, finally came to an end, with Russia declaring that it would not be renewed. During a phone call with South African President Cyril Ramaphosa, President Vladimir Putin expressed dissatisfaction with the initiative, emphasising that the goal of supplying grain to countries in need, particularly in Africa, had not been met.
Wheat futures rose 3% to their highest level since June as a result of the news, while corn and soybean prices also rose. This withdrawal is seen as the final nail in the coffin for a deal that was already facing difficulties, with United Nations shipping data showing that shipments had been declining throughout the year.
Economists and analysts discussed the implications of Russia’s decision. Simon J. Evenett, an economics professor specialising in global trade, expressed concern about certain countries losing access to cheaper Ukrainian wheat. However, he noted that the deal’s demise would only cause minor disruptions if it did not result in numerous export bans. The question now is whether Russia will weaponize its wheat exports, potentially imposing an export tax increase that would raise grain prices even further and fund Russia’s military campaign in Ukraine.
According to Peter Ceretti of Eurasia Group, the deal’s suspension will not immediately cause global food inflation. Russian grain shipments are expected to continue, and Ukrainian shipments via the Black Sea and Europe are unlikely to stop entirely. However, the termination of the agreement may exacerbate other upward pressures on food prices, such as drought in Europe and the onset of El Nino, which will disproportionately affect states in North Africa and the Levant that rely heavily on grain imports from the Black Sea region.
The Black Sea Grain Initiative, which was signed in July of last year, has facilitated the export of more than 32 million metric tonnes of food commodities from three Ukrainian Black Sea ports to 45 countries worldwide. The United Nations Secretary-General, Antonio Guterres, emphasised the agreement’s importance in ensuring global food security, particularly as conflict, climate crises, energy prices, and other factors threaten food production and affordability. This comes at a time when 258 million people in 58 countries are starving.
The withdrawal was described as a “blow” to markets by Carlos Mera, Rabobank’s head of agricultural commodities markets, because the initiative had supported price stability and prevented shortages in the developing world. Without the agreement, Ukraine will be forced to export grains and oilseeds via land borders and Danube ports, increasing transportation costs and putting pressure on Ukrainian farmers’ profits. This, in turn, may result in reduced planting the following season, exacerbating supply concerns.
Given that Russia accounts for more than 20% of global wheat exports, this development could lead to a greater reliance on Russian wheat by low-income countries in Africa and the Middle East.
Finally, Russia’s withdrawal from the Black Sea Grain Initiative has raised concerns about global food security and caused grain prices to skyrocket. While the immediate impact may not cause widespread inflation, the potential long-term effects on supply chains and vulnerable regions’ reliance on Russian wheat are areas that must be closely monitored. In the face of ongoing challenges, the international community must band together to find alternative solutions to ensure global food supply stability.
