Wheat will be a main dish on the G20 foreign ministers’ table in Bali tomorrow. Washington will call on the group to urge Russia to reopen its grain delivery routes.
On the eve of that meeting, US Assistant Secretary of State for Economic and Trade Affairs Ramin Tolui told reporters that “the G20 countries should hold Russia accountable and insist that it support the ongoing UN efforts to reopen sea routes for grain delivery,” the most important of which is wheat.
In a few months, a tense global wheat market entered a severe crisis, and wheat became a diplomatic weapon in the context of the Russian-Ukrainian war.
July is an important part of the year, as it is the month when harvests starts in much of the northern hemisphere, and exports start to rise.
But the Russian war on Ukraine, a major wheat producer, has disrupted sales of this vital nutrient. Today, attention is shifting to how the war affects shipments of the new season, and the ability of other countries to fill their shortages.
Russia and Ukraine accounted for 30 percent of world grain exports. Their production has increased steadily in recent years, with Russia topping the list of exporters, while Ukraine is on track to be third.
Many consequences were caused by the disruption of wheat exports, which threatens global food security. Among its most prominent indicators is that more than 200 million people in the world began to suffer from severe hunger, according to the description of the United Nations, which expressed its fear of a “hurricane of famine.”
Today, only dozens of countries produce enough wheat to be able to export it: China is the world’s largest producer of wheat but is also a major importer of this grain as its production is not enough to feed its 1.4 billion people.
The main exporting countries are Russia, the United States, Canada, Australia and Ukraine.
Last week, Russia sharply lowered taxes on grain exports to support in-season shipments for June-July. Russian wheat export prices have fallen as a result of pressure from the new crops, which farmers have begun to harvest, along with tax cuts and lower prices on the Chicago Stock Exchange.
“Sofacon” a company doing agricultural market research in the Black Sea region said that wheat prices for imports in July-August ranged between $375 to $385 per ton, compared to $390 to $400 dollars in the previous week, according to “Reuters”.
“Sofacon” quoted port data, which showed that Russia exported 250,000 tons of grain last week, compared to 500,000 tons in the previous week.
On the Ukrainian side, the Ukrainian Ministry of Agriculture announced a decrease in Ukrainian agricultural exports to about two million tons after the closure of its ports on the Black Sea. Noting that it talked about an increase in its wheat exports to 138 thousand tons in June, the last month of the 2021/2022 season, from 43,500 tons in May 2022, and compared to 662 thousand tons in June 2021, but the reasons for this increase were not given.
Grain prices had skyrocketed before the war. The price of wheat began to rise in global markets from the fall of 2021 and remained at high levels in light of the economic recovery after the pandemic.
After the Russian-Ukrainian war on February 24, the price of wheat reached record levels. The price per ton rose to more than 400 euros in May on the European market, double what it was last summer.
Prices have fallen in recent weeks for several reasons: the beginning of the harvest season, pricing in market developments in Ukraine, and the fear of an economic recession.
Negotiations were held under the auspices of Turkey in early June at the request of the United Nations, to establish “safe sea lanes” that would allow the export of Ukrainian stocks, but they did not lead to a result. The solution could have been for the countries that have stocks to release their reserves in the markets, according to “AFP”.
But most of the stock is in China, which will not resell it, while India, which pledged to increase its grain sales, reversed its decision after being hit by a devastating heat wave, banning exports temporarily, which led to an increase in prices.
In the short term, the solutions will be new crops that appear to be “fairly good” in America, Europe and Australia. The wheat harvest for 2022 is expected to reach 775 million tons, according to the US Department of Agriculture.