Russia and Ukraine Deal to Resume Grain Exports

Even though the UN-backed safe passage deal for Ukrainian grain exports was successfully agreed upon and signed by Russia and Ukraine, financial information provider S&P Global Market Intelligence believes it may take a few weeks to months to resolve insurance and safety concerns for the Black Sea routes from major grain ports, including Odessa.

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The agreement has in a way ended a wartime standoff that had threatened food security in several countries and cleared the way for exporting tons of Ukrainian grains.

Danube River ports will likely remain a safe and attractive option for grain exports in the near term.

"However, even with the new additional capacity of 1-1.5 million tonnes per month from Danube River ports, total grain export capacity is still 70-80% lower than the pre-invasion level in terms of combined bulk and general cargo vessel capacity, which is still not enough to offset the loss of export capacity," said Daejin Lee, Lead Shipping Analyst at S&P Global Market Intelligence.

Ukraine shipped around 5-6 million metric tonnes of grain per month via six major grain ports in the Odessa region during the harvest season before the conflict.

"In the early stage, small domestic vessels will operate through the passage first. However, to ship the grain cargo out of Ukraine efficiently, larger bulk carriers are necessary, which would likely call in after clearing insurance and safety issues," the report said.

Hence, the food inflation risk with global grain shortage is expected to continue in the near term until the passage from the major grain seaports in Odessa region fully return to normal, said Lee.

Notably, Ukraine is relatively a major player in the global wheat trade. Supply distributions led to a sharp spike in its prices post-Russia's invasion of Ukraine in late February. In a statement, UN Secretary-General Antonio Guterres had stated that the "Black Sea Initiative," would open a path for significant volumes of commercial food exports from three key Ukrainian ports in the Black Sea: Odessa, Chernomorsk and Yuzhny and would also bring relief to developing countries on the edge of bankruptcy and the most vulnerable people at the brink of famine.

It is worth mentioning that a day after Ukraine and Russia agreed on the grain deal, Russian missiles hit the southern Ukrainian port of Odessa.

At least two missiles hit the infrastructure of the port and two were shot down by Ukraine's air defence, Serhii Bratchuk, a spokesman for the Odessa military administration said as quoted by CNN.

As many as six explosions were heard in Odessa, according to CNN citing Ukrainian member of parliament Oleksiy Goncharenko.

Turkey's Defence Minister Hulusai Akar said that the Russian officials have told them that they have nothing to do with the strike on the Ukrainian Odesa port.

"In our contact with Russia, the Russians told us that they had absolutely nothing to do with this attack and that they were examining the issue very closely and in detail," the Turkish Defence Minister said in a statement.

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