Jul 20, 2023, 2:13pm EDT

Wheat prices are soaring after Russia exits grain deal

REUTERS/Yoruk Isik

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The News

Wheat prices have risen dramatically after Russia threatened to treat ships sailing to Ukrainian ports as military targets. It followed Moscow’s refusal to renew the Black Sea grain deal which allowed the safe export of grain from Ukraine.

For three consecutive nights, Russia struck the port cities of Odesa and Mykolaiv, heightening tensions over exports of grain from Ukraine – a crucial food source for the developing world.

We’ve curated insights and reporting from experts on how the demise of the Black Sea grain deal has impacted wheat prices and food security.

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  • Some of Ukraine’s neighbors in Europe have offered support with the transit of grain shipments through their territories to other states. However, a group of Eastern European countries still insisted on keeping restrictions on domestic sale prices, as some prices of food dropped when Ukrainian crops first entered local markets. – Bloomberg
  • It’s unlikely that Ukraine and Russia will see a grain export deal in the near term, said Jack Scoville, a broker specializing in agricultural commodities. No ship owner or ship insurer would want to “take a chance” on passing through the Black Sea, where food is typically shipped. Russia and Ukraine have both warned ships heading to ports surrounding the strategic corridor, with Kyiv saying that doing so would be “with all associated risks. — The Wall Street Journal
  • The effects of Russia’s decision to pull out of the grain deal will be felt acutely in parts of Africa and the Middle East, the International Rescue Committee said. Roughly 80% of East Africa’s grain supply comes from Russia and Ukraine, and in the region, more than 50 million people face “crisis levels” of hunger. Food prices have also shot up by 40% this year.
  • However, one global trade expert believes the Black Sea grain deal was already “on its last legs” given the steady drop in shipments over the last year. While Russia’s exit from the deal does impact countries sourcing cheaper Ukrainian wheat, “the deal’s demise [is] a minor disturbance,” as long as it doesn’t result in export bans, said Simon J. Evenett, an economics professor at University of St. Gallen. What does matter is “whether Russia weaponizes its wheat exports” he said, considering Russia was the world’s largest supplier during the last and current harvest cycle. — CNBC