THE BLACK SEA GRAIN INITIATIVE

• Russia has re-joined the Black Sea Grain deal. “The Russian Federation believes that the guarantees it has received currently appear sufficient, and resumes the implementation of the agreement,” the Russian Defence Ministry stated. It added that the mediation of the UN and Turkey had secured the continued cooperation.
• The Black Sea Grain deal endeavours to tackle escalating food prices emanating from supply chain disruptions because of Russia’s actions in the world’s ‘breadbasket’.
• Ukraine is among the largest exporters of wheat, maize, rapeseed, sunflower seeds and sunflower oil, globally.
• As per the UN Office for Coordination of Humanitarian Affairs, approximately 10.1 million tonnes of grains have been shipped since the initiative commenced. The deal has also been credited for having made a “huge difference” to the global cost of living crisis.

Background:

• In a move that allayed concerns about yet another disruption to global food supply chains, Russia last week re-joined the Black Sea Grain deal.
• The reversal came a day after Russian President Vladimir Putin stated that Moscow would suspend, but not end, its involvement in the deal.
• “The Russian Federation believes that the guarantees it has received currently appear sufficient, and resumes the implementation of the agreement,” news agency Associated Press quoted the Russian Defence Ministry as saying.
• It added that the mediation of the United Nations and Turkey had secured the continued cooperation.

Black Sea Grain Initiative

• The Black Sea Grain deal endeavours to tackle escalating food prices emanating from supply chain disruptions because of Russia’s actions in the world’s ‘breadbasket’.
• The deal, brokered by the UN and Turkey, was signed in Istanbul on July 22 this year. Initially stipulated for a period of 120 days, with an option to extend or terminate after November, the deal was to provide for a safe maritime humanitarian corridor for Ukrainian exports (particularly for food grains) from three of its key ports, namely, Chornomorsk, Odesa and Yuzhny/Pivdennyi.
• The central idea was to calm markets by ensuring an adequate supply of grains, thereby limiting food price inflation.
• Ukraine is among the largest exporters of wheat, maize, rapeseed, sunflower seeds and sunflower oil, globally.
• Its access to the deep-sea ports in the Black Sea enables it to directly approach Russia and Europe along with grain importers from West Asia and North Africa.
• Russia’s actions in the East European country had disturbed this route which earlier used to ship 75% of its agricultural exports — precisely what the initiative sought to address.

Why is it important?

• As per the UN Office for Coordination of Humanitarian Affairs, approximately 10.1 million tonnes of grains have been shipped since the initiative commenced.
• The UN Food and Agricultural Organisation’s (FAO) Food Price Index, which assesses the monthly change in international prices of a basket of food commodities, fell for the sixth consecutive month in a row during the September assessment period.
• It was earlier inferred that the supply situation in markets was seen to be easing, with potential for further price drops. People hoarding the grain in the hope of selling it for a sizeable profit owing to the supply crunch were obligated to sell.
• The initiative has also been credited for having made a “huge difference” to the global cost of living crisis.
• About 44% of the shipments, which include corn, wheat, rapeseed, and sunflower oil among others, reached high-income countries (including Spain, Netherlands and Italy among others), 28% reached low and lower-middle-income countries (Egypt, Iran, Sudan and Kenya among others) and 27% reached upper-middle income countries (China and Bulgaria among others).
• As pointed out by several observers, notwithstanding its reach, the initiative alone cannot address global hunger; it can only avert the chances of the global food crisis spiralling further, especially when the region is yet to scale prior year levels.
• In a nutshell, the deal’s suspension was expected to re-introduce the price pressures on foodgrains, especially that of wheat, with inventories being at historical lows.
• It could have particularly impacted countries in West Asia and Africa such as Egypt, Turkey, Lebanon, Sudan and Yemen which have benefitted from the resumption and are particularly dependent on Russian and Ukrainian exports.
• Joseph Glauber and David Laborde, senior Fellows at the International Food Policy and Research Institute (IFPRI), had observed, “Not only are those countries more dependent on Ukraine as a supplier of wheat and other grains, they tend to buy more during the winter to supplement their own harvests, which are largely consumed by the end of the year.”
• Thus, according to them, the suspension could have spurred food insecurity as well as potentially exacerbated political tensions.
• As for domestic challenges, the researchers observe that storage facilities in Ukraine are already at capacity even as farmers turn to harvest the crops planted in spring. This, combined with restricted export opportunities, would have implied lower prices for farmers even as shortfalls spur prices globally.

SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB