By Sybille de La Hamaide
GENEVA, May 16 (Reuters) – The end of the Black Sea Grains Agreement would not pose an immediate threat to the world market as Ukraine would still be able to export supplies, albeit at such a high cost that production in the surpassed by the war-torn country would likely fall even further.
Turkey, Ukraine, Russia and the United Nations are holding talks on ways to extend the deal negotiated in July that will allow Ukrainian grain to be safely exported across the Black Sea and expires on May 18.
Out of about 20 top Ukrainian and international traders and analysts polled by Reuters at the GrainCom conference in Geneva, a large majority said they expect the deal to be extended, albeit potentially with some delay.
Almost all delegates interviewed said that the much smaller harvest expected this year had eased export pressures via Black Sea ports and that alternative routes such as rail, truck and exports via the Danube might offset this.
However, these routes are generally significantly more expensive than transport across the Black Sea.
Nikolai Gorbachev, head of the Grain Union of Ukraine, warned that without the corridor, export logistics prices would skyrocket and farmers’ profit margins would be so severely reduced that they would stop producing large quantities of wheat and corn.
According to the International Grains Council, Ukraine’s corn harvest this year is expected to be just 21 million tonnes, about half the 42.1 million tonnes harvested two years before the conflict began.
Moscow has threatened to pull out of the deal over obstacles to its grain and fertilizer exports.
The Kremlin said on Tuesday there were still questions about Russia’s part in the deal and a decision had to be made on whether to extend the deal.
Dan Basse, president of Chicago-based consulting firm AgResource, said on the sidelines of the meeting that there would not be a major impact on global supplies this year unless the deal is renewed.
“With a smaller crop this year, anything can go west through Eastern Europe. The problem is that it will cost 15 to 20% more,” he said.
Under the agreement to create a safe shipping channel, Ukraine was able to export about 30.25 million tons of agricultural products, of which 50% was corn and 28% was wheat. Other shipped goods are rapeseed, sunflower oil, sunflower meal and barley.
“Do we need the corridor? I would say yes,” said Stefan Florescu, global head of wheat trading at CHS, the largest US agricultural cooperative, at the conference. “But if we don’t have it, will we find a solution to export everything through the EU export corridor? I would say yes too.”
(Reporting by Sybille de La Hamaide; Additional reporting by Nigel Hunt; Editing by Jan Harvey and Leslie Adler)
(c) Copyright Thomson Reuters 2023.