2023-07-30 20:31:07
The collapse of the Black Sea Grain Agreement on the export of Ukrainian grain to the rest of the world, which has been blocked by Russia in recent weeksinevitably impacts the American markets, where some are already suffering from the rise in prices and others, large producers, offer to provide supplies and alleviate the blow.
In the United States, up to now, a geopolitical analysis of the issue has prevailed, and government officials have highlighted the serious consequences that the rupture of the Black Sea agreements could have on global markets, and especially in poor countries.
The end of these agreements is considered to affect first of all the preferential markets of Ukrainian and Russian grain –Europe, Africa and the Middle East– and to a lesser extent to America, which will suffer virtually no supply disruption, as experts recall.
However, the rise in the international prices of wheat and corn detected this week in the markets of Paris and Chicago -reference in the sector- cannot but benefit the United States as the main exporter of cornalthough the discourse in all the media is one of concern for the global effects.
A combine during a rapeseed harvest in a field near the village of Kyshchentsi, amid Russia’s attack on Ukraine, in the Cherkasy region of Ukraine. Photo Reuters
For his part, Euroasia Group expert Peter Ceretti considered, in statements to the CNBC economic portal, that the impact of Russia’s withdrawal from the agreements must be taken with reservations, since the price of grain depends on many other factors, such as drought in Europe and the seriousness that El Niño may have this year.
Brazil, a beneficiary
Brazil, the world’s third largest producer of grains and cereals, behind China and the United States, with a 7.8% market share, and leader in some crops, such as soybeans, can benefit from breaking the agreement for exports from Ukrainian ports.
The vice president of the Brazilian Association of Agribusiness (Abag), Ingo Plöger, explained to EFE that “immediately” the price of “inputs” such as wheat and corn will rise because “Ukraine will transport them by land and river, with smaller vehicles and longer.”
This increase in the price of the chain, according to Plöger, will affect the “poorest” countries, but Brazil may end profiting at least in the “very short term”.
“In the medium term, all this is going to be balanced and readjusted with the three crops that Brazil has”, a country that “without any problem” can supply the demand of Europe without affecting the usual buyers from Asia and America, he stressed.
Tarik Thome, an investment analyst at the consulting firm Arton Advisors and specialist in agribusiness, indicated that the end of the agreement “will impact ‘spot’ (spot) prices.”
A mound of grain burned in Russian missile strikes at a grain facility in Pavlivka, Ukraine. AP Photo
“It will be reflected in the global dynamics of grains,” because Ukraine is “one of the largest exporters sunflower, corn, wheat and barley” and, in this context, Brazil can both benefit and feel affected.
“If, on the one hand, soybeans and corn, as the third largest world producer, will have a high demand that can be met, the negative impact could come from wheat, of which Brazil is a large importer,” the expert quoted.
And Argentina?
According to a recent report from the Rosario City Stock Exchange (Argentina’s main grain export port), during the year of validity of the Black Sea Grain Agreement some 32 million tons of grain were exporteds from Ukrainian ports, of which half (51%) corresponded to corn and 27% to wheat, so the first and main impact of the end of the agreement on international prices must be found in these two crops.
There are two grains in which Argentina has great global weight: It is the second largest exporter of corn grains (19% of global trade in 2021) and the seventh for wheat (6% of the world market). It is also the fourth largest exporter of sunflower oil in a global market traditionally led by Ukraine and Russia.
“The rises that we have seen in recent days, both in wheat and corn, come precisely from the impact in the Black Sea,” Catalina Ferrari, an agricultural markets analyst at the AZ Group consultancy, told EFE.
According to projections of the Grain Exchange of Buenos Aires, as of July 20, and with 66% of the planted area with maize already harvested, the country is on its way to a production of 34 million tons for the 2022/2023 campaign (18 million less than in the previous harvest due to the effect of the drought).
With a domestic consumption of corn of around 14 million tons, Argentina had imposed an export quota of 20 million tons this season, but on July 25 it was extended to 26 million tons, a measure that seeks to increase the income of foreign currency to the countryat a time when Argentina urgently needs to rebuild its meager monetary reserves.
In the case of wheat and sunflower, the use would be more limited.
Regarding the adverse effects for Argentina of the rise in international prices due to the conflict in Ukraine, beyond the inflationary impact on certain foods, agricultural producers they fear an escalation in fertilizer pricessince Ukraine is a major producer of urea.
The yellow corn of Mexico
The International Chamber of Commerce in Mexico (ICC Mexico) asked the Mexican government to join international efforts to revive the grain pact between Russia and Ukraine given the possible impact on prices.
Vandalized warehouses at a grain facility in Pavlivka, Ukraine, on Saturday, July 22, 2023, following Russian missile attacks. AP Photo
The global increase in the cost of cereals caused the price of corn tortillas, a basic element of the Mexican diet, to grow by 16.63% annually in 2022, making it the second generic product that contributed the most to inflation in 2022, when the rate closed at 7.82%, its highest level in 22 years and so far this century.
Although Mexico produces enough white corn for internal human consumption, it has a deficit in yellow corn for fodder, so in the second quarter of the year it imported 531 million dollars of corn compared to exports of just 17 million dollarsaccording to data from the Ministry of Economy.
Mexico also has a deficit in wheat, an input of which it imported 2,116 million dollars in 2022, compared to the 364 million dollars exported.
Source: EFE
PB
look also
#Latin #America #advantage #collapse #grain #agreement #Russia #Ukraine