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Is Black Sea Grain Deal Helping Food Security?


FILE: Farmers show some of the wheat grain during a harvest at a farm in Bindura about 88 kilometers north east of the capital Harare, Monday, Oct, 10, 2022

A deal to free up vital grain exports from Ukraine's southern Black Sea ports - which had been due to expire on Nov. 19 - was extended on Thursday for 120 days. The agreement, originally reached in July, created a protected sea transit corridor and was designed to alleviate global food shortages by allowing exports to resume from three ports in Ukraine,

A drop in shipments from major exporter Ukraine has played a role in this year's global food price crisis, but there are also other important drivers.

These include the COVID-19 pandemic and the climate shocks which continue to challenge agricultural production, mostly recently droughts in both Argentina and the United States.

The Black Sea grain export agreement, originally reached in July, created a protected sea transit corridor and was designed to alleviate global food shortages by allowing exports to resume from three ports in Ukraine, a major producer of grains and oilseeds.

The Istanbul based Joint Coordination Centre, which oversees the deal and is made up of Turkish, Russian, Ukrainian and U.N. officials, in August published procedures on the shipping channel, which aims to alleviate concerns of insurers and shipowners.

So far, some 11.1 million tons of agricultural products have been shipped, including 4.5 million tons of corn.

Shipments of wheat have reached 3.2 million tons, or 29% of the total. Other commodities shipped include rapeseed, sunflower oil, sunflower meal and barley.

However, shipments from Ukraine remain well below pre-invasion levels and will not fully recover for the foreseeable future. And that is helping to keep prices above pre-invasion levels.

Still, Ukraine's ability to export millions of tons of wheat through the corridor has been one element driving down prices in recent months after spiking in the wake of Russia's February 24 invasion.

Other factors include a record crop in major exporter Russia this year, the gloomy global economic outlook and a strong dollar.

But prices for wheat-based food staples such as bread and noodles remain well above pre-invasion levels in many developing countries despite the decline in Chicago futures, due to weak local currencies and higher energy prices which have raised costs such as transport and packaging.

Insurers initially said they were willing to cover if there were arrangements for international navy escorts and a clear strategy to deal with sea mines.

The mines have drifted far from Ukraine's shores, with Romanian, Bulgarian and Turkish military diving teams defusing some that have ended up in their waters.

It could take months to clear them.

Since then, they have created clauses including provisos that ships need to stay inside the corridor when transiting or risk invalidating their policies.

Following the July 22 agreement, Lloyd's of London insurer Ascot and broker Marsh set up a marine cargo and war insurance facility for grain and food products moving out of Ukrainian Black Sea ports with $50 million cover per voyage.

The cost of overall insurance for ships sailing into Ukrainian ports - which includes separate segments of cover - is nevertheless likely to remain steep.

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