For now, it’s ” not “. Russia, through Foreign Minister Sergei Lavrov, believes that it will be ” complicated “ to renew the agreement on Ukrainian grain exports, which expires on Saturday 18 March. A Russian ministerial delegation is expected at UN headquarters in Geneva on Monday, March 13 for a discussion that promises to be difficult.
This agreement, signed by Kiev and Moscow last July, under the aegis of the UN and Turkey, has made it possible to remove more than 23.5 million tonnes of agricultural products from Ukraine since August 1, by ports located on the Black Sea. He had hardly been renewed a first time in November. It must be again for a period of four months.
Prices back to pre-war level
This agreement works thanks to ship inspections carried out in Istanbul, jointly by Ukrainians and Russians. Over the past year, Ukraine, a major agricultural producer, has implemented alternative solutions by road, rail, or a river port on the Danube. But the sea route remains the main export channel.
This agreement is essential because it has made it possible to bring down prices on all the world grain markets. Prices had soared in the spring, awakening fears of an increase in malnutrition in the fragile countries of Africa and the Middle East, which are highly dependent on Ukrainian imports.
The markets have since come to their senses: the price of wheat has returned to its level of September 2021, i.e. before the outbreak of the Russian invasion. The FAO Food Price Index, which tracks changes in international prices, fell another 0.6% in February from its January level, slightly further from the record high reached in March 2022. after the start of the war in Ukraine.
A record harvest in Russia and Australia
Other factors contributed to the lull. American farmers have increased the area sown to wheat by 8% this year, while prices are attractive. Russia and Australia are heading for good harvests. « In wheat, the current campaign is comfortable. Even if it is still early in the year to be sure, Russia has probably reaped the biggest harvest in its history, above 92 million tonnes – some say 100 million tonnes – which should allow it to export perhaps up to 45 million, a record. And Australia is also on its way to a record,” says François Luguenot, expert in international agricultural markets.
Despite this favorable context, a failure to renew the Ukrainian grain agreement could mean a new spike in prices: “Even if the supply is there, it will have an immediate impact on market operators, mainly for psychological reasons,” confirms François Luguenot.
UN Secretary General Antonio Guterres traveled to Kyiv on March 8 to highlight “critical importance” the extension of the agreement. The subject was also on the menu at the G20 summit in India in early March. Russia is blocking because, according to it, the agreement is not fully implemented. It provides that Russia, in return for free passage to Ukrainian ports, can also export its wheat and fertilizers.
Russian ships banned from European ports
In law, it is. But in fact, Russia complains of incurring higher insurance premiums. Moreover, because of the sanctions, ships under the Russian flag are banned from European ports, while European ships can no longer dock in Russian ports. Banking transactions have also become more complicated.
“Russia currently has no major problems exporting its wheat, it does so massively and at low prices. There are customers who are ready to buy,” notes François Luguenot. In reality, the renegotiation of the agreement is above all, for Russia, every four months, an opportunity to test the determination of the countries which have imposed sanctions and to seek to open new breaches in this system.
It is therefore foreseeable that, at the end of the process, the agreement will be renewed. But it remains to be seen what concessions the developed countries will have to make to obtain Russian cooperation. And in the meantime, this context explains the absence of perceptible tension on the markets.
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China, first buyer of Ukrainian wheat
The price of wheat has remained around €280 per tonne in recent weeks, a far cry from the records of more than €400 reached last spring.
China is the largest recipient of Ukrainian wheat exports. Developing countries have received 49% of the grain exported since August 1, 2022. This is mainly maize (at 49%) and wheat (at 28%).
Ukraine aims to export 5 million tons of agro-food products per month from Black Sea ports, but never managed to achieve this goal, due to the slowness of inspections. In February, it exported 3.4 million tons on 78 ships. By October 2022, it had been able to export 4.3 million tons on 194 ships. This was the maximum reached since the beginning of the war.