The extension of the deal that’s bolstered Ukraine’s crop exports is still clouded by uncertainty, as negotiations continue the day before the existing term ends.
The agreement — brokered in July by Turkey and the United Nations — has been vital to shoring up global grain supplies after Russia’s invasion of Ukraine sent shockwaves through agriculture markets. Flows are carrying on for now despite the looming deadline, with fresh crop vessels continuing to head in and out of Ukrainian ports. New deals are being agreed, a shipping agent said, and Egypt also purchased 120,000 tons of Ukrainian wheat in a tender on Thursday.
The current term of the deal closes Saturday. Russia this week proposed extending the initiative for only 60 days — half the duration of its prior two terms — but Kyiv has pushed back, saying that it contradicted the terms of the overarching agreement. Discussions are under way with Russia about the duration of an extension, according to a Turkish official, who said they expect a deal will be concluded before the deadline.
“Ukraine is one of the key links of global food security, so we insist that the grain deal be open-ended and automatically extended for 120 days,” Ukrainian Prime Minister Denys Shmyhal said at a Cabinet meeting Friday.
It’s unclear whether ships will continue to sail inbound and outbound through the corridor if there is no announcement before the current term ends at midnight Saturday. When Russia unexpectedly stepped back from the deal in October, outbound traffic from Ukraine continued, while no new inbound ships were cleared. One vessel turned back after sailing most of the way through the Black Sea.
Shipping agents at Novik LLC and Inzernoexport GmbH Agency in Odesa said they were optimistic that vessels would continue to sail.
“There’s a risk it will fall through, but everybody is hoping for the best,” said Tariel Khajishvili, director at Novik LLC in Odesa. “I don’t see people panicking at the moment. People are fixing new vessels and booking places in our terminal for the next month-and-a-half.” He has 10 vessels waiting in a queue around Istanbul.
Even if the deal is extended, farmers and traders still face issues, according to Nibulon, a major Ukrainian crops merchant. The slow pace of ship inspections through the corridor and disruptions to delivery dates have spurred some customers to step away from contracts, it said.
“Ukrainian exporters will be forced to look for a new buyer for their goods at a lower price, with the cargo in hand, with chartered ships waiting in line, even if the agreement is extended for 60 days or another term,” said Volodymyr Slavinsky, Nibulon’s deputy trade director. “This is already causing direct losses to exporters, traders, producers of agricultural holdings and farmers.”
The Black Sea Grain Initiative’s terms indicate that it can be automatically extended for 120 days unless one of its parties seeks to modify or terminate the deal. A spokesman for the UN Secretary-General on Thursday declined to say whether the agency has received any official notices to do so and said discussions are ongoing.
A 60-day renewal would mean the deal expires close to a Turkish general election. Moscow’s push for the shorter term may partly be intended to await the results, said Andrei Kortunov, academic director for the Russia International Affairs Council.
Demand for fresh grain deliveries at ports has dried up this month, as traders aren’t keen to acquire more supply before the duration of the corridor is confirmed, said Andrey Novoselov, analyst at consultant Barva Invest. That means farmers — who are in need of extra cash flow before spring fieldwork — are looking to sell additional volumes over the western border, weakening prices there.
Those rail, road and river routes have made up a substantial portion of Ukraine’s crop sales in recent months, meaning exports won’t grind to a halt even if the corridor is disrupted. Still, the decision falls in a crucial part of the growing season as the weather warms and will have a bearing on which spring crops farmers ultimately opt to sow across Ukraine, said Alex Lissitsa, chief executive officer of agribusiness IMC.
Futures for wheat and corn — the top two commodities shipped under the deal — both headed for their first weekly gains in a month. Paris wheat futures are also up more than 1% this week.
