As a result, food prices soared, with prices of wheat, corn, and soybeans rising in Europe, the Middle East, and elsewhere.
So, what is the grain deal, and why is it so important to the global food supply chain?
Anna Nagorny is an expert in supply chains, including those involving perishable products such as food, and is co-chair of the supervisory board of the Kiev School of Economics in Ukraine. She explains how important Ukrainian grain is to feeding the world – and why the Black Sea is a vital route for getting it to the people who need it.
What makes Ukraine an important part of the global food supply chain?
Ukraine is called the breadbasket of Europe and is a major supplier of wheat, barley, sunflower products and maize to Europe as well as to developing countries such as the Middle East, North Africa and China.
More than 400 million people relied on food from Ukraine before Russia invaded Ukraine in February 2022.
One of the main reasons for this is that Ukraine has nearly a third of the most fertile soil in the world, which is known as chernozem, or black soil. And before the war, Ukraine could count on its year-round access to ice-free ports in the Black Sea to ship grain to nearby markets in the Middle East and Africa.
What happened when the war broke out?
Even before the war, famine was increasing throughout the world. The Russian invasion made things much worse.
The United Nations said in a recent report that from 2019 to 2022, more than 122 million people went hungry due to a combination of the effects of climate change, the COVID-19 pandemic, and the war in Ukraine. Other researchers have suggested that global hunger is at its highest level since at least the early 2000s.
From February to June 2022, at least 25 million tons of Ukrainian grain destined for world markets got trapped in Ukraine due to the Russian naval blockade, causing food prices to skyrocket.
How was the grain deal reached?
The United Nations and Turkey brokered what is officially known as the Black Sea grain deal with Ukraine and Russia on July 22, 2022.
The agreement allowed the safe passage of agricultural products from Ukraine from three ports on the Black Sea, including its largest, Odessa. While the original agreement was set to last 120 days, it has since been extended several times.
Ukraine has exported more than 32 million tons of food products through the Black Sea since August 2022. The World Food Program, the world’s largest humanitarian agency, has bought 80% of its wheat from Ukraine. Ethiopia, Yemen, Afghanistan and Turkey were the largest recipients of humanitarian aid shipments.
The United Nations has estimated that the grain deal has reduced food prices by more than 23% since March 2022.
The amount of grain shipped per month was already declining before the deal collapsed in July 2023, from a peak of 4.2 million metric tons in October to about 2 million tons in June. This is primarily due to a slowdown in the number of inspections carried out by the Russians before ships can leave the Black Sea.
Another problem in general is low production. Ukraine is expected to produce 31% less wheat, barley, corn and other crops this season than it did before the war. This estimate came before the destruction of a major Ukrainian dam by flooding the fields.
Why is the Black Sea so important to Ukrainian exports?
Colleagues at UMass Amherst and the Kiev School of Economics and I published a study in May 2023 that showed how important Black Sea ports are to ensuring Ukrainian grain reaches the world. Before the war, 90% of Ukraine’s agricultural exports were transported through the Black Sea.
While Ukraine also ships grain and other foodstuffs overland across Europe, it costs more and takes more time to do so than sea exports. Transportation costs on the ground have increased due to the war as a result of mines, the destruction of agricultural infrastructure and other challenges.
Why did Russia say it was withdrawing from the deal?
Russia has threatened before to withdraw from the agreement, but each time it has chosen to stay in it.
But on July 17, 2023, it said it was not willing to stay in the deal unless its demands to ship more of its own food and fertilizer were met. Over the next two days, Odessa attacked with drones and missiles in one of the largest sustained attacks on the port. Russia also said it would consider any ship in the Black Sea bound for a Ukrainian port a legitimate military target.
This has caused prices of commodities such as wheat and corn to rise, creating widespread uncertainty and global concern about hunger. Chicago wheat futures, a global benchmark, have risen about 17% since Russia pulled out of the deal.
While Russia has extended the agreement after previous threats, this time may be different. The Russian strikes have caused massive damage to Odessa, which could severely limit Ukraine’s ability to export through the port in the future – deal or no deal.
I think Russian President Vladimir Putin is using food as a weapon at a time when hunger is on the rise. I only hope that good intentions prevail and that Ukraine’s vital exports are allowed to continue.
Anna Nagorny is the Eugene M. Isenberg Professor and Chair of Integrative Studies, UMass Amherst.
This article is republished from The Conversation under a Creative Commons license. Read the original article.