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July 18, 2023

Ask the Expert: Russia-Ukraine grain deal

David Ortega, food economist and associate professor, in the Department of Agricultural Food and Resource Economics at Michigan State University’s College of Agriculture and Natural Resources, discusses Russia’s decision to pull out of the Black Sea Grain Initiative and what this means for Ukraine and the rest of the world.

What is the Black Sea Grain Initiative?


Russia’s invasion of Ukraine in February 2022 led to a halt of maritime grain shipments from the Black Sea region. This led to food security concerns as world food prices began to rise, disproportionally affecting countries that import food from the region. The Black Sea Grain Initiative is an agreement brokered between Russia, Ukraine, Turkey, and the United Nations to allow safe passage of vessels transporting commercial food and fertilizer exports from key Ukrainian ports in the Black Sea.


Why did Russia pull out of the deal?


Russia has cited not being able to export its own foodstuff as one reason for pulling out of the deal. While Western sanctions on Russia have not explicitly targeted agricultural products, the sanctions imposed have prevented shipping companies, banks and insurers from engaging with their agricultural sector. United States Secretary of State Antony Blinken has accused Russia of “weaponizing food, using it as a tool, as a weapon in its war against Ukraine.” 


How much of the world’s grains do Russia and Ukraine supply?


Russia and Ukraine supply a quarter of the world’s wheat and three-fourths of the world’s sunflower oil, which goes into the production of many processed food products. This region is known as the breadbasket of Europe and produces a significant portion of traded grains and other food commodities such as maize and barley. Ukraine alone is responsible for half of the global market for sunflower oil. 


What will this do to the global price of grains?


The termination of the Black Sea Grain deal poses a significant threat to world hunger and food prices. Many countries in North Africa and the Middle East depend on this region for cereals and other grains. Last year, in the wake of Russia’s invasion of Ukraine, global commodity food prices rose to record highs. 


What will this do to inflation?


Disruptions to the food supply and an increase in commodity prices puts upward pressure on food prices, but it’s important to keep in mind that the ingredients in the food that we buy represents a small fraction of overall food costs in the United States. The countries that will be impacted the most by the termination of this deal are those that import large volumes of grain from the Black Sea region — countries in North Africa and the Middle East. And parts of these regions are also facing drought, extreme temperatures, and other shocks. 



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