Will Ukraine’s grain deal lower global food prices?

Welcome to today’s Morning Brief, where we take a look at Ukraine’s grain exports and world food prices, Indonesian President Joko Widodo in China, Tunisia’s constitutional referendum and the world this week.

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Last Friday, Ukraine and Russia signed an agreement to free Ukraine’s grain for export. In theory, the deal would allow Ukraine to sell the grain it has stored away since its last harvest and help it raise much-needed funds to keep fighting Russia.

The world could also benefit: Friday’s news led to a 5% drop in wheat prices. So if more Ukrainian grain can hit the market, are lower prices in sight?

What a bargain? This grain must first come out of Ukraine and go through the Black Sea. Judging by the Russian missile strike on Odessa, one of the three ports involved in the deal on Friday, just hours after the deal was signed, the deal hasn’t worked out as a ceasefire -de facto fire in the area. Ukrainian officials say the strike by two Kalibr cruise missiles hit port infrastructure, while Russian officials say they hit military targets.

Darin Newsom, a veteran commodities analyst, shared US officials’ view that the deal may not be worth the paper it’s written on. “How can you build some kind of reliability into an agreement or some type of agreement with Russia? It’s just crazy,” said Newsom Foreign Police.

“I don’t think that’s going to solve the global crunch in a lot of these grain markets, I think the markets are going to remain very volatile, and we’re going to have to keep dealing with that until the biggest problem in L Russian invasion of Ukraine resolved.

Daejin Lee, senior shipping analyst at S&P Global Market Intelligence, agrees. Lee predicts that exports will continue to favor Danube ports over the Black Sea. “The risk of food inflation with the global grain shortage is expected to continue in the short term until the passage of the main grain seaports in the Odessa region returns to full normal,” Lee said in a note. .

Even if the deal is honored, Russia’s gains on the battlefield in recent months mean that liberating these Ukrainian ports will still not give Ukraine full control over its products. Ukrainian officials accuse Moscow of stealing at least 500,000 tons of Ukrainian grain, worth around $100 million, and shipping it through captured ports.

As Bloomberg reports, food exports from occupied Crimea have increased 50 times since the start of the war: already this year, at least 462,000 tons of food have been shipped from the port of Sevastopol against only 8,000 tons in the year. former.

The impact of war on wheat. The role played by Ukraine and Russia in wheat production can sometimes be overestimated. Although the two countries accounted for around 27% of all wheat exported last year, that doesn’t mean it’s the only way a country can get it: countries often grow their own wheat and can count on their reserves to deal with price shocks.

As Sarah Taber explored in Foreign Police in April, the wartime export deficit is projected at 0.9% of world wheat production – and India and Australia have already picked up the slack.

Even so, not all countries have the climate, land, or wealth to overcome a supply shortage. Most of Ukraine’s customers are usually in less-developed countries: Egypt and Indonesia were its top two customers in 2019, and 14 African countries relied on Kyiv’s exports for half of their wheat. “The noose was tightening, so the deal should help us breathe,” said Celestin Tawamba, CEO of La Pasta, Cameroon’s largest flour and pasta producer. New York Times following Friday’s news.

Tjada D’Oyen McKenna, the head of the relief charity Mercy Corps, gave the deal a cautious welcome, saying in a statement that it “will not materially change the price or availability of fuel, fertilizers and other commodities that are now beyond”. the reach of many, especially in low-income countries; and it certainly won’t help the majority of the world’s 50 million people move closer to starvation to avoid starvation.

The good news is that even if the Ukraine-Russia deal does not lead to anything, global food prices continue to fall. The price of wheat has returned to its pre-war price and last month the United Nations food agency recorded an overall drop of 2.3% in its food price index, the third consecutive drop in as many month.

“What we have to consider about wheat is that there is a crop growing somewhere every day of the year. So there is always supply coming into the market to change the supply and demand situation, and that has also helped to drive prices down,” Newsom said.

The bad news is that there are still plenty of inflationary factors. The index is still 29% higher than the same time last year as supply pressures that preceded the war have steadily pushed prices higher from 2020.

Monday July 25: New Philippine President Ferdinand Marcos Jr. delivers his first State of the Nation address.

Tuesday, July 26: European energy ministers hold an extraordinary meeting to discuss winter preparations.

Kenya’s presidential candidates take part in a televised debate.

Thursday July 28: The United States publishes its first estimate of GDP for the second quarter of 2022.

Uzbekistan hosts foreign ministers from the Shanghai Cooperation Organization (China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India and Pakistan) in Tashkent.

Friday July 29: The European Union publishes flash estimates of GDP figures for the bloc and the euro zone.

Sunday July 31: Senegal is holding legislative elections.

What we follow today

Jokowi in China. Indonesian President Joko Widodo arrives in China today, kicking off a three-country tour that will include stops in Japan and South Korea. Widodo is due to meet Chinese President Xi Jinping on Tuesday, making him the first foreign leader to meet the Chinese president since the Winter Olympics in February.

Referendum in Tunisia. Tunisians today have the opportunity to vote on whether to change their country’s constitution to significantly expand the powers of President Kais Saied, who took control of the country a year ago today. Voter turnout is expected to be low and all major political parties have called for a ‘no’ vote. Nevertheless, the measure should pass.

Lavrov in Uganda. Russian Foreign Minister Sergei Lavrov today continues his tour of African nations in Uganda where he is expected to meet President Yoweri Museveni. Speaking in Egypt on Sunday, Lavrov appeared to backtrack on previous statements outlining limited goals in Ukraine by saying Russia aims to “liberate” the Ukrainian people “from the regime which is absolutely anti-people and anti-history.”

Keep an eye on

The monkeypox emergency. WHO Director-General Tedros Adhanom Ghebreyesus has elevated a monkeypox outbreak to a public health emergency of international concern after the disease spread to dozens of countries in recent weeks. The statement encourages international cooperation and could lead the agency to recommend travel restrictions. Tedros’ appeal reverses the decision of a 15-member WHO expert committee, in which 9 members voted against describing the outbreak in such strong terms.

Pelosi in Taiwan? Chinese officials have reportedly issued stern warnings to their American counterparts ahead of a possible trip to Taiwan by House Speaker Nancy Pelosi. According to FinancialTimes, the warnings “were significantly stronger than the threats Beijing has made in the past when it was unhappy with U.S. actions or policies toward Taiwan.” US President Joe Biden’s only comments on the potential trip came after Pelosi received a briefing from the Pentagon. Biden said “the military thinks it’s not a good idea right now” for Pelosi to leave.

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