What is the Black Sea grain deal and what happens when it expires?
World
What is the Black Sea grain deal and what happens when it expires?
LONDON, (Reuters) - A deal allowing Ukraine to export grain via the Black Sea will expire at the end of Monday after Russia said it will suspend its participation.
The deal, brokered by the United Nations and Turkey last July, aimed to alleviate a global food crisis by allowing Ukrainian grain blocked by the Russia-Ukraine conflict to be exported safely.
WHY IS IT IMPORTANT?
Ukraine is a major producer of grains and oilseeds and the interruption to its exports at the outbreak of war pushed global food prices to record highs. The deal, agreed in July 2022 some five months after the war started, helped to bring down prices and ease a global food crisis.
Ukraine grain has also played a direct role with 725,200 tonnes, or 2.2%, of the supplies shipped through the corridor used by the United Nations World Food Programme (WFP) as aid to countries such as Ethiopia, Somalia and Yemen.
WHAT DOES THIS MEAN FOR FOOD PRICES?
Prices for grains and oilseeds have already risen in response to news that Russia will suspend its participation in the deal. The increase will lead to higher prices for staple foods, such as bread and pasta, in the coming months.
The situation, however, is better than in the months after the war started as supplies of grain from other producers such as Brazil and Brazil have increased.
Prices for wheat , the main ingredient in bread, have fallen by about 14% so far this year and corn is down around 23%.
The current global food crisis, however, is far from over. The WFP said last month that multiple emergencies had overlapped creating the largest and most complex hunger and humanitarian crisis in more than 70 years.
In 2022, a record 349 million people experienced acute hunger and 772,000 teetered on the edge of famine, the WFP said in an annual review.
WHAT IS THE STATE OF GLOBAL FOOD SUPPLIES?
Global corn stocks began the 2021/22 season at a six-year low and so Russia's invasion of Ukraine, one of the world's top corn exporters, led to a significant jump in prices.
A sharp increase in exports from Brazil, however, has since helped to boost supplies along with the export of nearly 17 million tonnes of corn through the corridor.
The U.S. Department of Agriculture has forecast global corn stocks by the end of the 2023/24 season will be at a five-year high.
Global wheat stocks are tighter and are forecast to be at an eight-year low at the end of the 2023/24 season, USDA data shows.
WHAT WOULD IT MEAN FOR THE WORLD FOOD PROGRAMME?
The WFP buys several million tonnes of food commodities every year of which about 75% are grains.
In 2021, WFP purchases totalled 4.4 million tonnes with Ukraine its top source, providing 20% of the total.
Ukraine mainly supplies wheat and split peas.
Most of the food goes to Africa along with some countries in Western Asia such as Yemen and so the WFP tends to source most supplies from eastern Europe, which is closer than major producers in North or South America.
The WFP has shipped 725,200 metric tonnes through the corridor. It will have to look elsewhere, potentially at a higher cost when a funding shortfall has already forced it to reduce activities in some countries.
