Wheat prices soar after Russia suspends UN grain deal

Wheat prices soared in global commodity markets after Russia pulled out of a deal to keep grain exports out of Ukrainian ports, heightening fears that Moscow’s move could deepen global food shortages.

“Every fraction of a percentage point pushes someone somewhere above the extreme poverty line,” United Nations aid chief Martin Griffiths told the body’s Security Council on Monday. .

Soft red wheat futures jumped 7% from Friday to Monday, while hard red wheat contracts rose 6%.

Moscow’s move is increasing pressure on international grain prices, which have already risen 11.2% since last year, according to the UN Food and Agriculture Organization’s Grain Price Index. agriculture (FAO).

In the United States, cereals and bakery products are up 16.2% since last year, according to the Labor Department. Overall U.S. food prices rose 11.2% amid broader consumer price increases that now stand at 8.2% in 2021.

“We urge the Russian government to resume its participation in the Initiative,” US Secretary of State Antony Blinken said in a statement over the weekend, adding that “Russia is again weaponizing food in the war it triggered”.

His call was echoed by other international diplomats at a meeting of the United Nations Security Council on Monday, who highlighted the trade and humanitarian benefits of the grains deal, known as the Food Initiative. Black Sea cereals.

So far, more than 9.5 million metric tons of agricultural products have been brought to world markets under the auspices of the agreement.

Russia suspended its participation in the grain export initiative as it said its ships were attacked by Ukraine on Saturday morning. But the UN’s Griffiths told reporters that this would not constitute a violation of the agreement which facilitates the transport of food.

“The attack took place at 4 a.m. on Saturday morning,” he said. “The vessels that were apparently attacked, which I believe were largely military vessels – there are no military vessels, to our knowledge, supporting the Black Sea Grain Initiative.”

Griffiths added that the initiative’s legal framework has been put in place to be able to handle these kinds of disputes, adding that he hopes that Russia will soon return to full participation in the agreement, which is still fully in place. UN point of view, with ships ready to move.

The practical difficulty, diplomats say, will be convincing marine insurance companies to insure ships and cargo without having Russia on board as the guarantor of safety. Without assurances from the Russian military, passing commercial ships through beleaguered waters is a much riskier proposition.

Admittedly, the cereal initiative was already a perilous operation.

Last week, a tug and a search and rescue boat were dispatched to the travel corridor to inspect what the UN called “a suspicious mine-like object”.

Although no mines were discovered during the inspection, the authorities decided to provide the transiting cargo ships with escort ships as additional protection.

Russia’s suspension of the grain deal comes as fighting and the rhetoric of war have intensified in recent weeks, with President Biden using the term “Armageddon” and the Russian Defense Ministry, without evidence, accusing Ukraine of planning to use a “dirty bomb”. .”

A US Department of Agriculture official told The Hill that it’s not entirely surprising that Russia is temporarily pulling out of the grains deal and that commodity markets are likely pricing in some uncertainty around the export corridor as the war continued.

Ukraine’s UN ambassador also said he was not surprised that Russia was suspending its involvement in the grain deal. Russia attacked the port of Odessa just a day after the deal was initially signed in July.

“We are outraged but not surprised by Russia’s announcement to suspend its participation in the Black Sea Grain Initiative,” Ambassador Sergiy Kyslytsya told the Security Council.

The dwindling supply of grain on world markets is bad news both for inflation, which is approaching 40-year highs in the United States, and for humanitarian conditions around the world.

Commodity prices have risen 55.7% since last year, with food products up 23.9%, according to the latest UN trade and development report.

The grains deal has had “massive effects on global welfare”, according to Rebeca Grynspan, secretary-general of the United Nations Conference on Development and Trade.

Russia’s agricultural exports tripled from July to September and Ukraine’s wheat exports quadrupled over the same period, she told the Security Council on Monday.

Due to the simultaneous fall in the FAO Food Price Index, 100 million people may have been kept out of poverty by the deal.

“The thought of even greater hunger next year – that’s the nightmare we face,” Griffiths said.

With the war in Ukraine now in its eighth month, alarm is also mounting over a humanitarian crisis in Ukraine this winter, with Russia unleashing a barrage of missiles on energy systems and utilities.

On Monday, Russian strikes on the Ukrainian capital Kyiv had left up to 80% of the city without running water.

Earlier in October, CBS News reported that part of the US Army’s 101st Airborne Division had been deployed for exercises in Romania, a country bordering Ukraine.

“In the capital Kyiv, most people have no water in their homes, and some 350,000 homes and businesses have no electricity,” the UN secretary-general’s spokesman said during the meeting. of a press conference.

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