Black Sea Grain Deal Abandoned – China Was “Biggest Recipient of Ukrainian Grain Under the Deal”

Financial Times writers Max Seddon, Henry Foy and Adam Samson reported yesterday that, “Russia has formally withdrawn from a UN-brokered deal to export Ukrainian grain across the Black Sea, potentially imperilling tens of millions of tonnes of food exports around the world.

“President Vladimir Putin’s spokesman, Dmitry Peskov, told reporters on Monday that the agreement had ‘essentially stopped‘ and Russia would no longer co-operate with the deal.”

The FT article noted that, “Carlos Mera, head of agricultural commodities markets at Rabobank, said that without a Black Sea deal, Ukraine would have to reroute exports via its land borders and smaller ports on the river Danube. This would increase costs and reduce farmers’ profits, which could lead them ‘to plant less next season, placing further pressure on supplies going forward.'”

Seddon, Foy and Samson added that, “Benchmark Chicago wheat prices on Monday traded broadly flat at $6.60 a bushel, after an earlier rally in prices. Grain prices overall have fallen about a quarter since the Black Sea pact was initially agreed, according to Citigroup.”

Wall Street Journal writer Jared Malsin reported yesterday  that, “China, a key international partner for Russia, called for an extension of the deal on Monday.

Despite Beijing’s support of Russia, China has been the biggest recipient of Ukrainian grain under the deal, according to U.N. figures.

“Ukraine has exported 7.9 million metric tons of grain to China, or just under a quarter of the overall amount sent out under the Black Sea initiative.”

And Matthew Mpoke Bigg, Ivan Nechepurenko, Liz Alderman and Farnaz Fassihi reported in today’s New York Times that, “Russia’s announcement came hours after a deadly attack on the Kerch Strait Bridge linking the occupied Crimea Peninsula to mainland Russia. [Kremlin’s spokesman, Dmitri S. Peskov] said the decision to suspend the grain deal was not connected to the attack.”

The Times article noted that, “The deal between Ukraine and Russia — which is also a major global supplier of grain, oil and other affordable food products — is particularly important in 14 African nations that depend on the two nations for half of their wheat imports, according to the United Nations’ Food and Agriculture Organization. Eritrea is fully dependent on them.”

Today’s article added that, “The initial agreement allowed Ukraine to restart the export of millions of tons of grain that had languished for months. Food prices have dropped over 23 percent from their peak in March 2022, according to the Food and Agriculture Organization’s Food Price Index. The accord has allowed vital food products to be exported from Ukrainian ports to 45 countries on three continents, the United Nations said.”

Meanwhile, Reuters writers Nigel Hunt and Jonathan Saul reported yesterday that, “Under the pact to create a safe shipping channel, Ukraine has been able to export 32.9 million tonnes of agricultural products, including 16.9 million tonnes of corn and 8.9 million tonnes of wheat.

“Before the conflict, Ukraine was exporting roughly 25 to 30 million tonnes of corn a year, mostly through the Black Sea, and 16 to 21 million tonnes of wheat….For a full breakdown of the countries and quantities exported: https://www.un.org/en/black-sea-grain-initiative/vessel-movements“

The Reuters article pointed out that, “Ukraine’s ports were blocked until the agreement was reached in July last year and it is unclear if it will be possible to ship grain now Russia is withdrawing from the pact.

“Additional war risk insurance premiums, which are charged when entering the Black Sea area, would go up and shipowners could prove reluctant to allow their vessels to enter a war zone without Russia’s agreement.

“Insurance industry sources say that cover arrangements could alter quickly. War risk insurance policies need to be renewed every seven days for ships, costing thousands of dollars.”