London – Agreements brokered by the United Nations and Turkey with Ukraine and Russia to allow food and fertilizer to reach from warring nations to parts of the world where millions go hungry have eased concerns about global food security. But they face increased risks.
Moscow has stepped up its rhetoric, saying it may not extend the deal, which expires on Monday, unless its demands are met, including ensuring that its agricultural shipments do not face obstacles.
The Black Sea Grain Initiative has allowed the export of 32.8 million metric tons (36.2 million tons) of food from Ukraine since last August, more than half of it to developing countries, including those that receive an exemption from the World Food Program.
If the deal is not renewed, “you will definitely have a new rise” in food prices, said Maximo Torero, chief economist of the United Nations Food and Agriculture Organization. “The duration of this rally will depend a lot on how the markets respond.”
The good news is that some analysts do not expect a permanent rise in the cost of global food commodities such as wheat given that there is enough grain in the world. But many countries are already struggling with rising domestic food prices, which help fuel hunger.
Here’s a look at the crucial agreement and what it means for the world:
What is the cereal deal?
Ukraine and Russia signed separate agreements in August 2022 that reopened three of Ukraine’s Black Sea ports, which were closed for several months after Moscow’s invasion. It has also facilitated the movement of Russian products amid Western sanctions.
Both countries are major global suppliers of wheat, barley, sunflower oil, and other affordable food products on which Africa, the Middle East, and parts of Asia depend. Ukraine is also a huge exporter of corn, and Russia is an exporter of fertilizer – other important parts of the food chain.
Dubbed the “breadbasket of the world,” the halt in shipments from Ukraine has exacerbated the global food crisis, sending grain prices soaring around the world.
said Caitlin Welch, director of the Global Food and Water Security Program at the Center for Strategy and International Studies.
The deal provides guarantees that ships will not be attacked when entering and leaving Ukrainian ports. The ships are being checked by Russian, Ukrainian, UN and Turkish officials to ensure they are carrying only food and not weapons that could help either side.
Meant to be extended every four months, the deal was hailed as a beacon of hope amid the war and has been renewed three times — the last two for just two months as Russia insisted on delaying its exports.
What has been done?
The deal helped lower global prices of food commodities such as wheat, which hit record levels after Russia invaded Ukraine.
As war caused food and energy costs to rise around the world, millions of people were thrown into poverty and faced greater food insecurity in already weak nations.
Once the grain deal was sealed, WFP regained its number one spot. 2 resource, allowing 725,000 metric tons (800,000 tons) of humanitarian food aid to leave Ukraine and reach countries on the brink of famine, including Ethiopia, Afghanistan and Yemen.
said John Staubert, senior director of environment and trade for the International Chamber of Shipping, which represents 80% of the global merchant fleet.
What threatens the deal?
Russian President Vladimir Putin said Moscow would not extend the grain deal unless the West fulfilled “the promises given to us”.
“We have repeatedly shown goodwill to extend this deal,” Putin told reporters on Thursday. “Enough is enough.”
He said he wanted an end to sanctions against Russia’s Agricultural Bank and restrictions on shipping and insurance that he insists have impeded agricultural exports.
Some companies have been wary of doing business with Russia because of the sanctions, but Western allies have offered assurances of food and fertilizer exemptions.
“It is not uncommon in situations like this for countries to use whatever tools they have to try to change sanctions regimes,” said Simon Event, professor of international trade and economic development at the University of St. Gallen in Switzerland.
A spokesman for the UN Secretary-General, Antonio Guterres, said he sent a letter to Putin this week proposing to facilitate transactions through the Agricultural Bank.
Welch said that “Russian claims that its agricultural sector is suffering is matched by the fact” that production and exports have been on the rise since before the war.
Russia exported a record 45.5 million metric tons of wheat in the 2022-2023 trade year, with an all-time high of 47.5 million metric tons expected in 2023-2024, according to USDA estimates.
Who is affected?
The International Rescue Committee describes the grain deal as “a lifeline for 79 countries and 349 million people on the front lines of food insecurity”.
East Africa, for example, has experienced both drought and severe flooding, destroying crops for the 2.2 million people who depend on agriculture for their livelihoods, said Shashuat Saraf, the group’s regional emergency director for East Africa.
“It is important that the agreement be extended over the long term to create some predictability and stability,” he said in a statement.
Analysts say that countries that depend on food imports, from Lebanon to Egypt, will need to find suppliers outside the Black Sea region, which may raise costs because they are far from it.
This would compound the costs for countries that have also seen their currencies weaken and debt levels increase as they pay for food shipments in dollars.
World Food Program chief economist Arif Hussain told reporters that low-income countries and people would have food “less expensive” if the grain deal was not renewed.
What about Ukraine?
Ukraine’s economy is based on agriculture, and before the war, 75% of grain exports went through the Black Sea.
It can send its food by land or river across Europe, so it won’t be cut off from world markets if the grain deal ends, but those routes have less capacity than sea shipments and have angered farmers in neighboring countries.
However, the Ukrainian Grain Association wants to send more grain across the Danube to neighboring Romania’s Black Sea ports, saying it is possible to double monthly exports along that route to 4 million metric tons.
Ukrainian wheat shipments are down more than 40% from their pre-war average, with the US Department of Agriculture expecting to export 10.5 million metric tons next year.
Ukraine has accused Russia of slowing down inspections of ships and preventing new ships from joining the initiative, which caused its food exports to drop from 4.2 million metric tons in October to 2 million tons in June.
What else affects the food supply?
The repercussions of the epidemic, economic crises, drought and other climatic factors affect people’s ability to obtain enough food.
The Food and Agriculture Organization said in its July report that 45 countries needed food aid. High domestic food prices lead to hunger in most of those countries, including Haiti, Ukraine, Venezuela, and many countries in Africa and Asia.
While drought could also be a problem for major grain suppliers, analysts say other countries are producing enough grain to offset any losses from Ukraine.
Besides massive Russian exports, Europe and Argentina are increasing wheat shipments, while Brazil had a standout year for corn.
“These markets are adjusting and producers are adjusting — and boy, the wheat and corn markets have adapted very quickly,” said Peter Meyer, head of grain analytics at S&P Global Commodity Insights.
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AP reporter Edith M. Lederer at the United Nations.
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See full AP coverage of the war in Ukraine at https://apnews.com/hub/russia-ukraine and the food crisis at https://apnews.com/hub/food-crisis.
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