Russia’s Withdrawal from Grain Export Agreement
Russia’s weekend withdrawal from an UN-brokered agreement to export grains from the Black Sea region is expected to affect shipments to import-dependent countries, escalating the world food crisis and increasing prices.
Following Russia’s departure, hundreds of thousands of tonnes of wheat that were scheduled for delivery to Africa and the Middle East are at risk, and Ukrainian corn shipments to Europe would suffer. The market value of wheat production was the highest in 2022 in Russia at $20,105 million, followed by Turkey at $13,119 million, Germany at $6,214 million, Italy at $2,829 million, Austria at $362 million and Greece at $317 million, according to GlobalData.
The market value of corn production was the highest in 2022 in Turkey at $3,333 million, followed by Russia at $2,849 million, Italy at $2,068 million, Germany at $1,187 million, Austria at $510 million and Greece at $380 million, according to GlobalData.
On October 29, 2022, Russia announced that it would halt participation in the UN grain pact for an “indefinite duration” alleging a major drone attack by Ukraine on its Black Sea fleet in Crimea. On October 31, 2022, Chicago wheat futures increased more than 5% and corn by more than 2% because of supply concerns.
Prior to the Russia-Ukraine conflict, interruptions in supply due to severe weather conditions and the COVID-19 pandemic led to all-time high prices of wheat globally and corn prices to a 10-year high. With shipping slots already committed until February 2023, Australia – a major supplier of wheat to Asia – is unlikely to fill any shortages.
Shares of Australia’s Graincorp, which reported supply shortages because of the Russia-Ukraine crisis, reported a fivefold increase in H1 profit, gaining more than 7%. On October 30, 2022, no ships passed through the designated maritime humanitarian corridor. Despite Russia’s withdrawal, the UN, Turkey, and Ukraine pushed through with the implementation of the Black Sea grain agreement and came to an agreement on a transit plan for 16 ships to proceed on October 31, 2022.
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