Black Sea grain deal: How the collapse could impact the world
TQ Samsun last grain ship is off the Black Sea in Istanbul, Türkiye, July 17, 2023. /CFP
TQ Samsun last grain ship is off the Black Sea in Istanbul, Türkiye, July 17, 2023. /CFP

TQ Samsun last grain ship is off the Black Sea in Istanbul, Türkiye, July 17, 2023. /CFP

There are a "number of ideas being floated" to help get Ukrainian and Russian grain and fertilizer to global markets after Russia's decision to withdraw from the Black Sea Grain Initiative, the United Nations said on Tuesday.

UN Secretary-General Antonio Guterres "will continue to explore all possible avenues to ensure that Ukrainian grain, Russian grain, Russian fertilizer are out on the global market," UN spokesperson Stephane Dujarric said.

Wheat and corn prices on global commodities markets jumped Monday after Russia's move. The most-active corn contract on the Chicago Board of Trade was up 1.5 percent at $5.21-1/4 a bushel after touching its highest since June 30 at $5.23 earlier in the day.

Meanwhile, soybeans climbed 1 percent to $13.84 a bushel, while wheat gained 1 percent to $6.68-1/4 a bushel, having risen earlier in the session to $6.70, the highest since July 6.

Moscow suspended its participation in the Black Sea grain export deal on Monday, when the deal was set to expire, but said that it would immediately return "when the part of the Black Sea deal related to Russia is implemented."

Meanwhile, Ukraine stated on the same day that it hopes to continue the deal after Russia's withdrawal.

Monday's withdrawal has caused concerns worldwide. Guterres warned that the withdrawal would also strike a blow to people in need everywhere.

Why is the deal important?

Russia and Ukraine signed separately with Türkiye and the UN the deal in Istanbul in July 2022, allowing Ukraine to export its grain and other agricultural products from its Black Sea ports.

Together with the memorandum of understanding between Russia and the world body, the deal has been a lifeline for global food security and a beacon of hope in a troubled world, according to Guterres.

The initiative has ensured the safe passage of over 32 million metric tons of food commodities from Ukrainian ports. The World Food Programme has shipped more than 725,000 tons to support humanitarian operations, relieving hunger in some of the hardest-hit corners of the world, including Afghanistan, the Horn of Africa and Yemen.

At a time when the production and availability of food are being disrupted by conflict, climate change, energy prices and more, these agreements have helped to reduce food prices by over 23 percent since March last year, said the UN chief.

Medium-term impact worries

Kyiv was the world's top exporter of sunflower seed oil and the fourth-largest for wheat and corn, and its exit from the global market sent prices to record highs in May. The opening of the export corridor on August 1, 2022, helped ensure supplies for importing nations and bring down prices, even if the Russia-Ukraine conflict has cut Ukrainian farm output.

Analysts warned that the collapse of the Black Sea export corridor would create market tension and push up food prices over the medium term.

Gautier Le Molgat, an analyst at Agritel, which provides data and analysis on agricultural markets, noted that it's currently harvest season in the northern hemisphere and that it is a calm period on the markets, which reacted little to the news of the suspension of the deal.

"Future needs will be clear at the end of the harvest," said Le Molgat.

Though there is currently no shortage of wheat on the global market, experts warned that a drop in Ukraine's export volumes could create a problem. "An extended closure of the corridor will have an impact on food price inflation, which will affect food security," said the Farm Foundation's Olia Tayeb Cherif.

The UN's World Food Program is also at risk of disruption as it sources wheat from Ukraine, which it supplies to Afghanistan, Yemen and African nations, noted Cherif.

(With input from agencies)

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