The Russian invasion of Ukraine which started early on in the year has led to disruptions in the global supply chain. As a result, commodity prices have hit the ceiling and on top of that, the value of the currency has depreciated in major grain-trading countries.
Fortunately, in July 2022, Russia and Ukraine signed a deal with the United Nations and Turkey as mediators and the deal opened the Russian blockade on Ukraine’s ports and allowed grain shipments from Ukraine to reach global markets.
Russia and Ukraine together constitute 40 percent of the wheat trade in the global market and any fluctuations in their supply chain or trade policies reflect directly in the Global Wheat Market. With the signing of the Black Sea Grain deal, shipments started flowing into different global markets. However, this month Russia backed out from the deal amid a conflict of interest between the two countries.
The Export Numbers
Exports of foreign materials for October, decreased by 21 percent to the lowest figure since the beginning of the year. In October, the iron and steel industries of Ukraine exported 1.06 million tonnes of iron and manganese ore, thereby registering a drop of 21 percent as compared to the previous month. Deputy Minister of Economy, Ukraine- Taras Kachka reported it to be the lowest indicator since the beginning of the year.
In October, pig iron shipment exports only reached 72,200 tonnes which is 63 percent less than the previous month’s shipments. All in all, the steel sector is at a gloomy stage according to Taras Kachka.
In general, Ukrainian exports in October decreased by 4.6 percent compared to September to 9.2 million tonnes. The total value amounted to US$3.8 billion which is 8.2 percent less than in September.
“This was caused by a decrease in export volumes and a decrease in world prices for both food and industrial goods,” commented the Deputy Minister of Economy.
The main share of exports goes to the European Union countries ($2.5 billion) like Poland (US 560 million), Romania (US 412 million), and Germany (US 233 million). The rest of the world bought goods worth US$1.3 billion, including Turkiye (US$243 million), China (US$152 million), and India (US$112 million).
What is the Black Sea Grain Initiative?
The Initiative on the ‘Safe Transportation of Grain and Foodstuffs’ from Ukrainian ports is called the Black Sea Grain Initiative. It is an agreement between Russia and Ukraine brokered by Turkey and the United Nations.
This February, the Russian invasion of Ukraine began, and with the tensions and conflicts between the two, Russia implemented a naval blockade which made Ukraine curb its export shipments. This led to severe disruptions in the supply chain and the intensity was such that the United Nations had to intervene. Both developed and developing countries rely on Ukraine for their grain needs and just when the grain shipments started reaching the global markets, countries around the world took a sigh of relief.
On July 22, 2022, the United Nations, in unison with Turkey, brokered an agreement between Russia and Ukraine to allow grain exports. This brought a sigh of relief to the global market. Following the agreement, exports from Ukraine rose dramatically.
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