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Deal Reached on Ukraine Black Sea Grain Exports, Expected to Be Signed Friday

Jared Malsin, William Mauldin and Alistair MacDonald reported in today’s Wall Street Journal that, “Officials from Russia, Ukraine and the United Nations planned to sign a deal to resume exports of Ukrainian grain via the Black Sea on Friday, Turkish and U.N. officials said, in an announcement that raised hopes of freeing food supplies trapped by the Russian invasion.

“U.N. Secretary-General António Guterres landed in Istanbul on Thursday evening, a U.N. official said, adding that the parties involved had come to an agreement but cautioned that last-minute problems could still arise before they sign off on the deal, expected on Friday.

“Russia didn’t immediately comment on the plans for a signing ceremony on Friday. Turkey’s and Russia’s presidents have sounded positive about the talks in recent days, as has a senior Ukrainian official.”

The Wall Street Journal (Page A8- July 22, 2022).

The Journal writers explained that, “In recent days, substantial differences remained among the warring parties over issues ranging from the demining of ports to safe passage for cargo vessels, Western officials said. U.N. and other officials didn’t say how those disputes were resolved. Should the governments reach a deal, enforcement will be key, and privately owned freighters, insurers and sea crews might be reluctant to handle cargoes from Odessa and other war-zone ports, given the threat of further attacks, according to the officials, grain traders and other industry experts.”

Malsin, Mauldin and MacDonald added that, “Safe passage for ships handling food cargoes and procedures for searching private vessels to ensure they aren’t carrying military equipment are among the issues to be resolved, officials said. Beyond that, Ukraine has demanded international security guarantees to prevent a Russian attack once mines are removed.”

Financial Times writers Laura Pitel, Max Seddon and Henry Foy reported yesterday that, “Russian and Ukrainian negotiators have agreed a deal to export millions of tonnes of stranded grain, Turkey has announced, and will meet in Istanbul on Friday to pave the way for an end to the months-long Russian blockade of Ukraine’s Black Sea ports.

Unless derailed at the last minute, the deal will allow an estimated 22mn tonnes of wheat, corn and other crops to be collected by cargo ships from the Ukrainian coast and transported across the world, averting fears of a global food crisis.

The FT article pointed out that, “Under the deal, cargo ships travelling to and from Ukrainian ports will be inspected at monitoring sites in Turkey in order to allay Moscow’s concerns that the vessels could be used to smuggle weapons, according to two people briefed on the details.

“A third, non-Nato country, whose identity is not specified in the agreement, may provide mine sweeping duties if needed to clear a safe path for cargo ships.

“Speaking on his way back from his visit to Tehran on Tuesday, Erdoğan told journalists that he hoped that the plan could start being implemented ‘in the coming days.’ But some western officials have cautioned that it could take longer before shipments resume.”

Also yesterday, Bloomberg writers Megan Durisin and Ugur Yilmaz reported that, “Turkish President Recep Tayyip Erdogan and United Nations Secretary General Antonio Guterres will attend the signing, according the statement from Erdogan’s spokesman. Wheat futures in Chicago declined on the news before paring some of the losses to fall 1.6%, while corn dropped 2.8%.

“The agreement could help revive the crops trade from one of the world’s biggest wheat, corn and vegetable-oil exporters, improving global supplies and helping ease worries of a food crisis. However, it is unclear how the deal will be implemented and whether Ukrainian sales can return to normal levels with Russia’s invasion still raging.”

Meanwhile, Financial Times writer Derek Brower reported earlier this week that, “Ukraine exported 54mn tonnes of grain from a record harvest of 106mn during the 2021-22 marketing year that began last July, according to the Ukrainian Grain Association. But the 2022-23 harvest could come in almost 40 per cent lower. The UGA warns exports could plunge to just 18mn tonnes without a swift reopening of the Black Sea route, hurting a range of countries from north Africa to south Asia that depend on Ukraine’s products.

“Bohdan Chomiak, a former farmer who is on the board of GN Terminal, a grain facility in Odesa port, said Ukraine’s agricultural sector ‘has gone into zero mode.’ Credit lines will dry up and many farms will go bust unless the blockade is ended soon. ‘This will be a bad year.’

The financial loss from the blockade is already running at $170mn a day, the UGA calculates, pushing many grain shippers and traders to the brink of bankruptcy.”

Brower indicated that, “Many farmers are in even deeper financial distress as low domestic demand and prices are compounded by rising fuel and fertiliser costs.”

“But the blockade of Black Sea ports means farmers could soon run out of places to store their grain and oilseeds,” the FT article said.

Keith Good Photo

Keith Good is the social media manager for the farmdoc project at the University of Illinois. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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