Why the World Needs an Extension of the Black Sea Grain Initiative

Wheat

Russia

Published Nov 10, 2022

An agreement was forged between Russia, Ukraine, and Turkey along with the UN to solve global food price inflation and shortages: the Black Sea Grain Initiative (BSGI). Approximately 75% of Ukraine's agricultural exports are traded through Black Sea ports, and the agreement allows for the establishment of a grain corridor to facilitate these exports at the time of war. As of October 28, over 10 million metric tonnes of grains, oilseeds, and other foodstuffs had been exported under the agreement. The BSGI has been a joint success between Russia, participant countries, and the UN, as it has alleviated global concerns about food security and balanced prices.

Since the beginning of the conflict between Ukraine and Russia, the world's food security has been under threat, as these countries were major exporters of grains, oil, and fertilizers. The exports were halted due to various sanctions, which resulted in increased prices of essential goods. In order to calm global food price inflation and shortages, the Black Sea Grain Initiative (BSGI), a UN-brokered agreement between Russia and Ukraine, was signed on July 22, 2022. It allowed shipments of grains and related foods to resume from the ports of Odesa (Odessa), Chornomorsk (Chernomorsk), and Pivdennyi (Yuzhny). Prior to this, these ports had been effectively blocked since mid-February, initially due to Russian military exercises and then by mines placed by Ukraine to prevent possible Russian sea-based attacks after the invasion. About 75% of Ukraine’s agriculture exports are traded through the ports on the Black Sea, and the majority leave through the three ports covered by the deal.

A grain corridor was established in the agreement to meet massive demand from the global market. Similarly, Russia was allowed to export grain and fertilizers to overcome the ongoing issues in the global market. According to UN Comtrade, as of October 28, over 10 million metric tonnes of grains, oilseeds, and other foodstuffs had been exported under the agreement. The BSGI deal allowed Ukraine to more than double its exports compared to pre-deal levels. However, exports are still 50% less than the pre-war levels. The deal helped ease the pressure on the domestic market and gave an opportunity to Ukrainian farmers who were unable to move their products prior to this. In addition, the UN Black Sea Grain Initiative Joint Coordination Centre has said that 150,000 tonnes of wheat have been exported through the World Food Programme to poor countries in the Horn of Africa (Djibouti, Ethiopia, Somalia, and Yemen) and to Afghanistan.

Ukraine’s Grain Exports as of 28th October 2022

Source: COMTRADE; UN Black Sea Grain Initiative as of 28 October 2022.

On the contrary, Russia was claiming that the deal mainly benefits high-income countries as Ukraine exports a large share of grains to Europe as well. Based on this, along with security issues, Russia announced that it was suspending its participation in the BSGI on October 29, 2022. The market was quick to react as global prices started to rise again and supply disruptions began once more. However, Russia rejoined the agreement on November 2, bringing relief to wheat farmers in the region.Months following June are crucial for wheat farmers as a large volume of winter wheat which was planted in the fall is ready to harvest by August of the next year. Ukraine typically ships a sizable portion of its annual export volumes, particularly wheat post August as fresh harvest comes in. Overall, the BSGI has been a joint success between Russia, participant countries, and the UN, as it has alleviated global concerns about food security and balanced prices. Almost 120 days in, there is now the opportunity to go one step further and make sure the arrangement continues so that all stakeholders benefit from it, including the farmers and the people most vulnerable to food price inflation.