Wheat prices could rise again if a deal to allow the flow of grain from three Ukrainian ports is not renewed on May 18, placing more strain on food prices across the world and exacerbating food shortages in vulnerable countries such as Somalia, Yemen and Sudan.
Russian Foreign Ministry spokeswoman Maria Zakharova on Thursday said the Black Sea Grain Initiative was not “a buffet you can pick and choose from” and it should be implemented fully.
Russia says parts of the deal that allow it to export its own agricultural goods are not being honoured, but the EU insists there are no restrictions on such trade.
Ms Zakharova said UN efforts to save the deal were not enough.
About a third of global wheat exports pass through the Black Sea, which since Russia’s invasion of Ukraine last February has become a war zone of naval mines, Russian naval shipping, rival drones and aircraft.
Rising wheat production
The war sent wheat prices — and other key food staples such as cooking oil, which was also a major export from Ukraine — rising to record highs. But two key developments have since emerged, according to Hadi Fathallah, a food security expert with the Namea risk consultancy, who has also worked with the World Food Programme.
Mr Fathallah says the surge in prices a year ago incentivised higher production outside Russia and Ukraine, while this year, good harvests are forecast, which could take the sting out of price rises for the Middle East and North Africa (Mena).
"For Syria, Lebanon and Tunisia, closing the corridor will not be detrimental," he says.
"All three countries import using small coasters and vessels of 30,000 to 50,000 tonnes," he tells The National. "Small coasters are outside the [grain initiative] corridor, going out of the river from the ports of Reni and Izmail. So these are not affected at all in terms of logistics. For vessels of that size, they can import them from Russia. In fact Syria is mainly importing from Russia, and Lebanon has imported one 30,000-tonne shipment from Russia and one now is on its way from the corridor under the World Bank Food security project.
In November, when the deal was temporarily halted amid a row over sanctions against Russia, wheat prices rose around 3 per cent.
"Even if the agreement falls apart, it will have little effect on the price of wheat. We are going into the harvest season and it looks like we will have a favourable harvest. So unless the Russians make some impossible military success on the southern front, or some nuclear disaster happens, market-wise, it shouldn't be a big spike in prices, so it will not affect the Mena countries in terms of price," he says.
But some analysts still see long-term risk.
Tahseen Al Mousawi, a water resources and agriculture expert in Baghdad, is concerned for food security in Iraq even as the country celebrates a bumper harvest.
“If the deal will not be renewed the situation will be terrible because under normal circumstances we are not in control of food security because of water scarcity and climate change," he says, pointing to rising populations in many Mena states, including Iraq, and rising food demand.
“The situation in Iraq is good in terms of wheat production as this year [there were] heavy rains and production is expected to each five million tonnes, so it is highly likely that the local consumption will be secured and that will reduce the imports.”
But in the long term, Mr Al Mousawi says the picture is bleak and that "many countries will be hit hard" if the Ukraine war worsens.
An increase in fuel prices also placed greater strain on global food supply by raising the costs of production and transport, while fertiliser supplies, a key export from Russia and Ukraine, were severely constrained.
A deal brokered in July between the UN, Russia, Turkey and Ukraine, known as the Black Sea Grain Initiative, allowed shipping to continue from the ports, briefly reducing prices.
Mr Fathallah says the deal will likely be renewed.
"The agreement is important for both the Russians and the Ukranians, and the Chinese and Turks. Ukrainians have an issue with inland transport now with East Europe, so they really need the corridor to get their grains out," Mr Fathallah says.
"The river ports are not enough. Russia needs it as it already has a big inventory, and a new harvest is coming in so they need to get products out. And the Chinese and Turks are buying at discount from both, and they appreciate the business continuing. Now the multinational trading companies left or are leaving Russia, which is putting pressure on the Russians. That's why they are informally not selling any wheat below $275, trying to artificially keep the price high, but they can't do that for long."
Africa under food price pressure
The failure to renew the deal would have serious implications for some of the world’s poorest countries, many of which are struggling with high inflation.
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The UN warned last month that from the total exported under the deal, “55 per cent of food exports go to developing countries”, and noted how the deal had decreased the FAO Food Price Index for 10 months, “clearly demonstrating the positive impact of both agreements on global food prices”.
According to analysis by the Washington Institute for Near East Policy, a think tank, most of the grain under the deal last year went to Turkey, Egypt, Libya, Israel, Tunisia, Algeria, and Iran.
The UN warned last month that “while food prices have gone down from their all-time high at the start of the war, they remain high compared to pre-crises levels”.
It went on: “Moreover, currency depreciations prevent many developing countries from benefiting from global price decreases, and, in the most severe cases, prices have even gone up.”
As of March 5, about 23 million tonnes of grain had been shipped under the deal, the UN says. But while much of the Mena region has successfully diversified its sources of wheat, countries in East Africa, including Sudan, remain vulnerable.
The risk that the deal may not be renewed comes at a time of “widespread crop failures and livestock deaths have left more than 20 million people at risk of acute food insecurity”, according to a report by World Weather Attribution, an organisation tracking climate change-linked events.
As many as 20 million people will be at risk of worsening hunger.
The Horn of Africa, which includes Djibouti, Ethiopia, Eritrea, Kenya, Somalia, South Sudan and Sudan, is facing the worst drought in 40 years, according to the UN.
Somalia has been particularly hard hit, according to the UN, who said last month that 43,000 people had been killed by drought in the country, half of them children, in 2022. The International Rescue Committee says Somalia depends on Ukraine for about 90 per cent of its wheat.
