The world wheat market quickly reacted to the agreement to create a safe wheat and fertilizer export corridor from the Black Sea to the outside, which was signed yesterday (Friday): following the importance of Ukraine and Russia to the wheat market, the price dropped by 3% to $7.7. With this, the price drop of about 39% in two months was completed.
On the other hand, Ukraine also received some bad news in the last day: following a request by Kyiv from credit providers to postpone the repayment date by two years, the credit rating agency Fitch lowered Ukraine’s rating by two notches from CCC to C. This is a lower ranking than backward countries such as the Democratic Republic of the Congo, Laos and El Salvador, which means that according to the analysts – the country is unable to meet some of its obligations.
Despite the possibility for Russia to safely export wheat and fertilizer from the Black Sea out, while the sanctions against it are active, the big news from the agreement is the possibility for Ukraine to safely export wheat from the ports of Odessa, Yuzhny and Chornomorsk. In these ports there are currently about 20 million tons of wheat ready for export, especially in Odessa. According to the President of Ukraine Volodymyr Zelensky, the value of the amount of Ukrainian wheat ready for export is about 10 billion dollars.
The wheat market has been through a lot since the Russian invasion of Ukraine, a country that until the war was regularly among the ten most significant wheat producers in the world. After at the beginning of February the price of wheat was about $7.73 per bushel (a unit of measure used to measure the volume of bulk dry goods), it jumped to about $12.4 per bushel shortly after the Russian invasion (March 7). On May 17, the price jumped to $12.78 per bushel, but since then there has been a consistent decline to a low following the wheat agreement between Russia and Ukraine.
“Putin spits in front of the UN”
The main points of the agreement state that Ukrainian ships will be able to transport wheat without fear of sea mines; During the deliveries, some of which include Yuval Dashan, there will be a lull in the fighting. The third party to the agreement is Turkey. Since the Treaty of Montreux, signed in 1936, Turkey has sole authority over the entry and exit gate to the Black Sea, the Dardanelles and the Bosphorus.
The hope is that the headquarters of control and coordination for the creation of the safe corridor established in Istanbul will be respected by Russia, which does not seem obvious. “We will not take advantage of the removal of sea mines from Ukrainian ports for an attack,” claimed Russian Defense Minister Sergei Shoigu in an interview with the state-run “Russia 24” channel. “We took on all the obligations in the agreement.” On the other hand, a Russian attack took place already today, in which they launched two cruise missiles towards the port of Odessa. “Putin is spitting in the face of the United Nations,” Kiev said. The United Nations and the European Union’s foreign minister, Joseph Borrell, were quick to condemn the attack, which, according to the Ukrainian army, hit a wheat facility in the port. However, Turkish Defense Minister Hulusi Akar noted that “the Russians denied to us any attack on the port of Odessa.”
With all the power of Ankara, which since the outbreak of the war has prevented warships from entering and leaving the Black Sea, it also fails to stop the fighting that is taking place. Those who continue to try to help Kiev from afar are the USA. The White House announced yesterday that it will provide Ukraine with aid in the amount of 270 million dollars, including 100 million dollars for drones. Rather, Washington is considering providing assistance with attack drones.
Those who hope that the wheat agreement between Russia and Ukraine is a first step on the way to a calm in the fighting are the United Nations. Two senior officials of the organization told the news agency “Reuters” that the expectation is that the agreement will be implemented in practice “within a few months”, and will lead to the renewal of the export rate of the pre-fighting days: About 5 million tons per month. Deputy Head of the Office of the President of Ukraine Andriy Sibiha said that the agreement is for 120 days and renewable. However, in light of the short duration of the current agreement – the ambition is that the creation of the safe corridor for exports from the three ports in Ukraine will be completed soon.