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# 									Impact of the Black Sea Grain Initiative							

FPC Briefing

Joseph Glauber, Senior Research Fellow with the International Food Policy Research Institute

David Laborde, Senior Research Fellow with the International Food Policy Research Institute

Wednesday, November 16, 2022, 10:00 a.m. ET

Washington D.C. 

November 16, 2022

## 								Summary							

        -  Senior Research Fellows Joseph Glauber and David Laborde have conducted extensive research on the impacts of the Black Sea Grain Initiative and discuss its importance to global food security. 

**THE WASHINGTON FOREIGN PRESS CENTER, WASHINGTON, D.C.**  (Virtual)

**MODERATOR:**Hello, and welcome to the Foreign Press Center’s briefing on the impact of the Black Sea Grain Initiative.  My name is Wes Robertson, and I’m the moderator for today’s briefing.  Our briefers today are Joseph Glauber and David Laborde, both senior research fellows with the International Food Policy Research Institute.  

And now for the ground rules.  This briefing is on the record.  The views expressed by the briefers are their own and do not necessarily reflect those of the Department of State or the U.S. Government.  We will post a transcript and video of this briefing later today on our website, which is fpc.state.gov.  Please make sure that your Zoom profile has your full name and the media outlet you represent.  Our briefers will now give opening remarks, and then we will open it up for questions.  

Over to you, sir.  

**MR GLAUBER:**Okay, great.  Thanks, Wes.  My name is Joe Glauber.  I’m a senior research fellow at the International Food Policy Research Institute, and I’m joined today by David Laborde, who is also a senior research fellow at IFPRI.  And we’ve been doing a lot of work over the past year, certainly, tracking what’s been going on with the war in Ukraine.  

And what we thought we would do today is have some brief presentation on the Black Sea Grain Initiative, which frankly is kind of a unique agreement in the sense of while a war is going on, there is an agreement here to move grain out of Ukraine.  This, of course, was a big – has been a big concern since the start of the war in that Ukraine is a major wheat producer, a major corn producer, and – sunflower oil in particular – and that a lot of those exports have been blocked since the start of the war all the way up through the 1st of August or so when this agreement went into effect.  It was a 180-day agreement.  It is scheduled that 180 days will end at the end of this week.  And so what we thought we would do is kind of trace what’s been happening over the course of the last 180 days.  

Next slide, David.  

So this chart just shows the overall long – over the last 11 months or so what prices have looked like.  And I might add we’ve already started from a period where prices were very high and elevated at the beginning of this year.  So in January coming into the season – or coming into the calendar year, we saw wheat and maize prices at the highest levels they had been in several years.  Really, you have to go back to 2012, ’13 or so to see prices that high.  And I think the general feeling was that as the new crops started to come in, starting with the wheat crop in the Northern Hemisphere in June and then with crops coming in – the spring planted crops in the fall, that we would begin to see prices start to come down.  

Unfortunately, with the war, prices immediately hit – or jumped 30, 40, 50 percent for wheat and about 20 percent or so for maize and remained highly elevated until about late May.  And they started coming down for a variety of reasons.  One, we had very good production response out of other countries.  We’ve seen a number of – Russia was able to export wheat of their – we saw wheat – countries like India and Brazil export a lot more wheat than had previously been thought.  And a lot of the crops in the Northern Hemisphere where there had been a lot of concerns – early season concerns about yields, those crops ended up being better than had been expected.  And so prices started coming down such that when the deal went into place, they were already – had come down pretty much to pre-war levels.  That’s about where we’ve been.  

Markets are still very much focused on the crops around the world and what sort of yield prospects we see out of – particularly out of the Northern Hemisphere and now – turning now to the Southern Hemisphere.  But you can see that, again, the effect of this agreement, though, has been – has been quite good in the sense of crops have flown throughout – have been able to be shipped out of those Ukraine – or the Black Sea ports.  Where we did see a blip in prices was when – the temporary suspension, right around the end of October, early November, where prices went up.  Wheat prices went up around 6 percent.  Maize prices went up around 2 percent.  Russia rejoined the agreement a few days later and then now – we’re now looking – the market now is looking forward to seeing what will occur after – whether or not this agreement will be extended.

Next slide, David.

So here – or what actually has been shipped, if you look at the cumulative agricultural exports under the Black Sea Grain Initiative, you can see that there’s been steady shipments.  What did happen was that – inspections unfortunately.  So the way the agreement works is that grain is exported from Ukraine, it then goes to Turkey where the ships are – under the terms of the agreements, the ships are then inspected and then allowed to move forward.  Unfortunately, there was bottlenecks because of the grain that was being exported out of – particularly in the months of September onward that there was a big backup.  That backup has been reduced over the last few weeks largely because of, initially, the suspension in the agreement and the fact that now, with the agreement scheduled to – unless it’s renewed, scheduled to expire at the end of the week, there’s been very little activity out of Ukraine ports.  Presumably if that – the agreement is extended, then we’ll see exports pick up again.  But that gap of wheat that had been shipped but not yet inspected has now declined substantially.

Next slide, David.

You can – and this slide just shows what has been exported under the terms of the agreement.  And I think you can see that largely – two things to note.  One is that yes, if you look at what traditionally was exported – so if you look at the – what was exported during August through October in 2021, a lot of maize, for example, it went to Europe.  Europe has been a traditional market for Ukraine for maize and barley, but you can see that that continued under the initiative.  We still – there is still a lot of maize going there, but maize also is being shipped to the MENA countries as well.  And you can see in particular with wheat, some has gone to Europe, but a lot has gone to other areas, traditional recipients of wheat from Ukraine, both through commercial sales and also through humanitarian assistance.  So we have some going to 12 percenters, so going to Africa, south of Sahara, which is roughly the same proportion that was going out in 2021.  

And so I think that generally, you’re seeing volumes very – at least the destinations looking very, very similar to what it was in 2021, but the volumes are down considerably.  And I think that’s still a concern that Ukraine still – while this has really helped boost exports out of Ukraine, they still have well below the pace that they’ve seen in recent years.  And frankly, in some of the big months, harvest – or shipping months in the fall, they can be shipping anywhere from 5 to 6.5 or so million tons a month and that’s down considerably from what we see right now.  So I think that’s still a concern.  

What – the problem for Ukraine is the fact that because they were unable to ship as much wheat as they typically would in the – during the course of a regular season, that means that storage capacity has been hampered and they’re – essentially are now resorting to temporary storage bags.  What that meant for prices is that that lowers prices internally.  So that means there’s disincentives for producers, particularly with high-input costs for fertilizer and energy and other inputs.  That means that there’s just strong disincentives to plant, and we already see that the fall plantings for wheat this year are down considerably, at least according to the Ukraine ministry of agriculture.  

And frankly, what that does is push this tight grain situation into next year by virtue of the fact that a country that accounts for about 10 percent of world exports in wheat and is similar percentages for maize and some 50 percent of vegetable oils in terms of – or sunflower oil – that means that we’ll see less of that next year as well.  And that – so those are – the supplies will have to be made up in the world market or we would see continued high prices.  Next slide. 

This is just to conclude with the fact that we have written a lot on Ukraine and – with several blogs there.  And I think in the chat you’ll see some other additional – or see some links there as well.  But we’re more than happy to take questions, and I’ll stop there, Wes, and listen. 

**MODERATOR:**  Okay, great.  Thank you so much for your presentation.  We’ll now move into the Q&A portion.  If you have a question, please go to the participant field and virtually raise your hand; we’ll call on you, and you can unmute yourself and ask your question.  You can also submit questions in the chat box.  If you’ve not already done so, please take the time now to rename your Zoom profile with your full name and the name of your media outlet. 

I don’t see any hands raised yet.  We did have some advance questions.  The first I’ll read off is from Yusuke Hirata from Sankei Newspaper, Japan.  He asks:  “Russia claims grains are not exported to developing countries.  What do you think about that?” 

**MR GLAUBER:**  Well, thanks.  I’m going to let David Laborde, my colleague, say – address the first question.  David? 

**MR LABORDE:**  Yes, thank you, Joe.  Thank you for the question.  As Joe has already shown you in one of the slide, I think that what we are seeing in the export pattern – so where these products are going to under the agreement – is exactly what we were expecting, meaning that the main markets are supplied – first of all, Turkey.  I think that Turkey is a very large importer of these products, as it’s usually the case.  Then you have Iraq for some animal feed.  Then you have Egypt for wheat but also for corn for their own livestock industry.  And you will see particularly this pattern coming from high-income countries up to the very low-income countries.  We’ve humanitarian shipments from the WFP going to Yemen and other countries and situations.   

So the message here is that the outcome of the deal is not biased.  It reopened the port of Ukraine to export, and Ukraine export where it used to export to, and it really depend on the product.  So of course maize – and Ukraine has a lot of maize – it go mainly to economies that have a need for maize in the livestock sectors from the Middle East up to Spain, but also to East Asia, including China for some of the feed products, when the wheat go to North Africa and to some sub-Saharan African countries or in the Middle East, either Iran or Yemen.  So what we see is a bit back to normal, and of course large economy may buy more, but once again, it’s just letting trade take place again. 

The last point I want to make is some to extent that doesn’t even matter so much, because what matters is that the country that want to buy grain buys their grain and do not start to go to other places to find grain that will push price up, meaning that, for instance, if you were in Spain before and you were not able to get your maize from Ukraine, then you start to buy more maize from South America.  And that you start to compete with Morocco, then you start to compete with (inaudible).  So really what is important is to get back these crops on regional and global markets to limit the pressure on prices.  And that’s what the deal has done, even if the total volume are still not what they should be compared to the past. 

**MODERATOR:**  Thank you.  I do see that we have a hand raised.  It’s Alex Raufoglu from Turan News.  Alex, if you’d like to unmute yourself and ask your question. 

**QUESTION:**  Yes.  First, thank you so much for doing this.  And Joe and David, thank you so much for a very compelling presentation.  My name is Alex Raufoglu.  I represent Azerbaijan’s independent news agency, Turan.  A couple questions here. 

As you said, the world is facing unprecedented hunger.  To put this into numbers, how many millions of people are estimated to be marching towards starvation at this point?  Also, can you give us a few instances to the BSGI is working – and must bail out the country, of course – working?  I spoke with farmers in my region a couple of days ago, and more of them mentioned that – estimated that price he paid for grain had dropped somewhere between 20, 25 percent since the blockade was lifted.  If that’s – is that your observation as well or if you – or do you have different numbers? 

And lastly, not to play the advocate of the devil’s role, but Russia keeps saying that the issue of expanding the grain deal has not been – yet been resolved.  Do you have any idea what they are talking about?  Again, thank you so much for doing this. 

**MR GLAUBER:**  Yeah.  Let me – I’m going to start with answering a couple of questions.  I’ll let David come in again.  I think these are great questions.  In terms of the price impact of the deal, I think the – this recent action of the suspension of the deal probably gives you a pretty good notion.  Roughly 5 to 6 percent, what – we have seen prices come down, but they largely came down even before the deal went into place.  I don’t want to – I want to caution that this is not saying that the deal has very little significance.  It has great significance, and I think in particular insofar as moving into next year is concerned.  But it’s just to say that prices have come down, but they’re still at very high levels.  I think if we had had a normal crop season here with no war, with normal crops, that we would have seen prices come down from those January levels even further, much further than what we see right now.  

So the market’s still bearing the weight of the fact that less grain is – has been able to come on to the market.  But I think there’s no question this agreement helps that immeasurably.  I do think Russia has a lot of – if you read the press reports, what Russia would like is to have some of the adverse effects of sanctions be addressed.  I think countries have been very – a number of countries that have imposed sanctions have been – also have said that they are exempting from sanctions exports of fertilizer, exports of food.  But in fact, there have been barriers.  And you’ll see on our website that was cited we have just put out a blog last week on sanctions and what the impact of sanctions have been, particularly as affecting fertilizer.  And so that’s been in the negotiations, at least what I read in the press.  

David, you may want to comment on the vulnerability issue and — 

**MR LABORDE:**Yes.  So I will also just add along with my story that price are seasonal.  So I mean that right now in many countries during the fall harvest took place so it has contributed to see these local prices going down in places.  But also on world markets, what we have to keep in mind is normally Ukraine is a big exporter during the late fall and during winter.  And that’s where our trade’s pretty important to see the Ukrainian supply coming on regional market and global market at that time.  So for the future of the deal, that’s relevant.  

Now on the food crisis situation, so as of today we have more than 200 million people in 45 countries that are what we would call severe food insecurity – so people for which it’s not only the fact that every day they end their workday with the feeling of hunger, is that there this lack of food starts to be threatening for their lifestyle, their health.  And we have basically five countries that are nearly famine situations, covering a half billion people.  So yes, we are in a severe situation globally.  

Now, there are many drivers, as (inaudible) food prices (inaudible) many events of last year, from the consequence of the global COVID crisis to climatic events.  And goal here is not to start to say all the war in Ukraine is costing this amount of life, (inaudible) amount of hunger.  All of these shocks are combined with each other.  And as usual, it’s the last drop that is going to make the vase or your cup overflow.  And that’s why we are so cautious about not adding more problems to a situation that is very tense like the suspension of the deal, like the war.  

So the more we can go back to normal, the more it will help in a situation where, yes, basically half a million persons, people today on the earth on the verge to die of hunger and famine.  And we have 200 million of people that feel hunger so strongly that their health suffer from it, both physical health and mental health.  And still we have more than 800 million people on earth that are what we call chronic hunger – so in a regular basis, not enough to eat.  And all the crises we have going on just makes things worse.  

**MODERATOR:**Thank you so much for those responses.  At this point, I don’t see additional questions.  Do you have – either of you have a – oh, I do see a question that just came in the chat box?  Let me see here.  This question is from Ahmandou Kane from Les Echos Senegal.  The question is:  “You did not mention the African Union mediation on the agreement.  Do you think it was really significant?”

**MR GLAUBER:**Yes, I looked at it briefly.  I don’t know what’s going on with the individual – the actual discussions that are ongoing with Turkey and the UN.  I do know that many countries, including those countries of the African Union, recognize this as a very key – that is to keep this grain flowing.  Because again, sub-Saharan Africa benefits, as David mentioned, not just from those countries that do import from Russia and Ukraine, but also in terms of general price levels.  So anything that can keep prices lowered, everyone’s going to benefit.  So I think that – I think that is a very big political – the will around the world for making this thing work I think is very, very strong.  And so I’m hopeful that we can get an agreement over the next day or so and have, again, ships leaving Ukraine and supplying the rest of the world shortly.

**MR LABORDE:**And we – and to have that – I think that mediation from the African Union is actually a nice move, but not a decisive one.  They’re saying that Africa is literally between a rock and a hard place (inaudible).  What they need is basically markets to operate in the Black Sea region to be peaceful, and that both Ukraine and Russia could export.  That’s what will benefit Africa.  But Africa doesn’t really have leverage on any of the (inaudible) at stake.  I think the (inaudible) here is really Turkey, because Turkey is – between that, one, it’s a NATO country, but it has also a strong link with Russia – is importing a lot of grain both from Russia and Ukraine, and it’s important for its own economic activities.  

And so the support from the African Union is noticeable, but Africa is still more, I would say, sometimes used as a token in some decisions than really, I mean, listened to from the beginning of the crisis.  

**MR GLAUBER:**Let me just say, though, I do think it is very significant because oftentimes countries with – particularly with this conflict are – often say, well, we’re being asked to choose between two powers and we really – we – we’d like to remain neutral in a war.  And with – when it comes to food, I think there’s less neutrality.  Everyone wants to see more food being shipped. So I think that that actually is a very positive thing.  And so it – again, I think having that sort of pressure on the parties to come to some agreement is quite, quite powerful.

**MODERATOR:**All right.  This time, I don’t see any more questions submitted in the chat box or any hands raised.  I don’t know if either of you have any final remarks you’d like to make.

**MR LABORDE:**We hope that the bill will be (inaudible) after November and that we can go, step by step, back to normal for the benefit of all consumers of food products around the world, but in particular the more vulnerable because – so the farmers that need to sell that product to prepare the next crops are (inaudible), because we need to think about the future too.  

**MR GLAUBER:**Yes, and I too – I would just add that I think, unfortunately, we’re not out of the woods on this.  I think this is – this – tight supplies are going to be with us for several months and maybe all the way through next year.  And so certainly we’re hoping that this deal is extended, and moreover that we are – we hope that we see good crops around the world to make up for the deficits because I think that’s gonna be the important thing, is ultimately to rebuild global stocks, that we can actually hope that prices will start to come down.

**MODERATOR:**All right, thank you.  This concludes our briefing.  I want to give a special thanks to our briefers for sharing their time with us today, and those of you participated.  Thank you and good day.

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Black SeaDistrict of ColumbiaFood SecurityForeign Press CentersForeign Press CentersNew YorkRussiaUkraine

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