The crucial grain deal that revived Ukraine’s crop exports and helped bring down global prices is up for renewal again, and the market is betting on another extension.
(Bloomberg) — The crucial grain deal that revived Ukraine’s crop exports and helped bring down global prices is up for renewal again, and the market is betting on another extension.
The current agreement runs through March 18 and can be continued for another 120 days if no side seeks to modify or terminate the pact. The United Nations on Wednesday stressed how critical the deal is, and Kyiv and Moscow have voiced demands with talks underway.
Futures for wheat and corn — the top two crops shipped through the corridor — have fallen in recent weeks amid an outlook for ample supplies. Wheat has hit the lowest since 2021, also pressured by big Russian and Australian harvests.
The market is likely “taking a policy of no news is good news,” said James Bolesworth, managing director at CRM AgriCommodities. “But that tees us up for some surprises potentially. I think it’s going to stay volatile.”
With talks underway and the deadline fast approaching, here are four charts that show how the current agreement has impacted global grains markets:
Exports, With Delays
Ukraine has shipped 23 million tons since the deal was first struck in July. That’s helped pick up the pace from earlier in the season, though volumes are still down about a quarter from last year.
The major holdup has been inspections for vessels heading in and out of the three ports covered by the agreement. Only about three outbound ships are cleared each day, limiting the initiative from reaching its 5 million-ton monthly target. Ukraine says Russia is purposefully slowing the pace, something Moscow denies.
Lower Prices
The exports have helped take a gauge of global food-commodity costs — which hit a record high just after Russia’s invasion — to a 17-month low. That’s easing pressure on food inflation, though consumers continue to feel the pinch at grocery stores.
Ukraine’s farmers have planted wheat for this year’s harvest and will soon sow corn and sunflowers. Farming is key for the country’s economy, and renewing the deal will be vital to clearing supplies.
Other Routes
Ukraine is still moving grain by rail, road and river — routes turned to when its Black Sea terminals were blocked at the start of the war. It will keep using those avenues if Black Sea trade gets disrupted, but they can’t handle all flows and are a costly alternative.
Large amounts have gone to neighbors like Romania, Bulgaria and Poland. Since those nations have lots of available crops to sell before the next harvest, that’s also weighing on wheat prices, Strategie Grains analyst Helene Duflot said.
Tackling Hunger
Moscow has criticized the deal for not benefiting the poorest countries and helping to ease hunger, though the United Nations says the initiative is achieving its goal of suppressing food costs by limiting global prices.
The UN has confirmed talks are ongoing, without saying where each side stands or whether any seek to amend the pact. UN Secretary-General Antonio Guterres met President Volodymyr Zelenskiy in Kyiv on Wednesday to discuss the deal, and stressed the importance of a renewal. The UN expects a Russian delegation in Geneva for discussions next week.
–With assistance from Archie Hunter and Olesia Safronova.
(Updates with information on Russian talks in 13th paragraph.)
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