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Grain Wars

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Photo: Ukraine plays a leading role in certain product niches on the international food and agricultural raw materials market. Source: Collage The Gaze.
Photo: Ukraine plays a leading role in certain product niches on the international food and agricultural raw materials market. Source: Collage The Gaze.

Ukraine's subjectivity, in the context of its global role, was clearly manifested during the war on the international food market. If we take the total share of the Ukrainian economy in the structure of the world economy, it is not significant (less than 0.2%). At the same time, Ukraine plays a leading role in certain product niches on the international food and agricultural raw materials market.

Ukraine ranks first in the world in terms of sunflower oil exports. Ukraine is one of the top three exporters of grain, primarily corn, and one of the top five exporters of chicken eggs. In addition, Ukraine is one of the top ten poultry exporting countries, primarily chicken.

It is Ukraine's subjectivity in the global food market that explains the price crisis of agricultural "goods" and the threat of famine in some countries of Asia and Africa. 

Russia's war against Ukraine and the related blockade/occupation of Ukrainian seaports led to an increase in international wheat prices at the beginning of the war to $500/ton.

At the beginning of the full-scale war against Ukraine, Andriy Yarmak, an economist at the Investment Department of the Food and Agriculture Organization of the United Nations (FAO), said: "Wheat and corn account for 27% of all calories, or, in other words, all the food in the world! Ukraine and Russia together export more than 25% of all wheat in the world. This is a basic product for food security. There is no export from Ukraine now, and exports from Russia have almost stopped. Prices are already in space. Wheat is already over $500! Where does this wheat go? Mostly to third world countries. And it is already difficult there and there is a threat of hunger riots."

In general, Ukraine's role in the development of the global food market is to directly and indirectly influence the nutrition of approximately 800 million people in the world, while the country's own population is just over 40 million.

Deutsche Bank analysts point out: "Both Russia and Ukraine are major wheat producers, accounting for about 30% of global exports, so this is one area where the direct economic impact is acutely felt." Overall, the Black Sea region accounts for approximately 12% of the world's food calories sold.

In 2021, before the full-scale war, the share of food and agricultural raw materials in the structure of exports from Ukraine exceeded 50% of the total export flow for the first time in history.

Between 2016 and the outbreak of war in 2022, the agricultural sector saw nearly $10 billion in capital investments, and yields, for example, in sunflower cultivation, increased by 14%.

Ukraine can become a global leader in the segment of the "green" agricultural model of the economy, which is based on organic products and raw materials. Today, the structure of agricultural exports in Ukraine is mainly raw materials, with asymmetric markets, when Ukrainian supplies shape the price dynamics of both agricultural raw materials and meet the narrowly segmented demand for certain types of raw materials.

Over the past few decades, there has been a clear correlation between the prices of major export crops and oil and oil products. These price flows have been formed as a result of the active use of bioethanol and biodiesel.

In simple terms, the higher the price of gasoline produced from oil, the greater the demand for raw materials for biofuel production and, accordingly, for basic agricultural crops. Thus, the higher the growth of oil and natural gas prices, the more dynamically the prices for agricultural raw materials grow, forming the so-called "agflation" or "agrarian inflation" in the world, which Western analysts first started talking about in 2008.

In this context, Ukraine is becoming a key economic actor that also provides certain links in the global "green transition," shaping the capabilities of the global economy in the biofuel segment, in particular, of countries such as China and geopolitical alliances such as the EU. It can be argued that the role of Brazil or Ukraine in the biofuel market in the coming years will resemble the influence of the Persian Gulf countries on the markets of classical fossil fuels in the 70s and 80s of the last century.  

Food for the Global South

Globally, 40-45% of Ukraine's agricultural exports go to Asia, 30-35% to the EU, up to 15% to Africa, and less than 10% to the CIS. Processed products made from Ukrainian agricultural raw materials are sought after in Asia and Africa. Among the major buyers of Ukrainian agricultural raw materials are: Algeria, Bangladesh, India, China, Egypt, Vietnam, Israel, Ethiopia, Indonesia, Iraq, Libya, Saudi Arabia, Tunisia, Turkey, Morocco, South Korea.

It should be noted that the use of biofuels in the world will grow, and thus Ukraine's economic subjectivity will increase.

In the United States, for example, the Energy Policy Act of 2005 and the Renewable Fuels Standard were adopted, which provide for the production of ethanol from grain and cellulose. The war has limited access to Ukrainian agricultural exports for the largest importers. 

According to Refinitiv Agriculture, wheat prices in Egypt increased by 23% and flour prices by 44%, which will result in an additional loss of $1 billion. Algeria - price increase by 40%. Significant problems are observed in Syria, Lebanon, Tunisia, and Libya. The strategic reserves of these countries have been reduced to one month of consumption.

These facts indicate a significant increase in the subjectivity of Ukraine as a key player in the global food market. Moreover, we are talking about strengthening the role of Ukraine both at the regional level (food security of individual countries) and at the global level (dynamics of world prices for agricultural raw materials). Ukraine also has a significant influence on the implementation of global strategies, in particular, the Green Deal in the context of biofuel production and related raw materials.

Istanbul Grain Initiative

That is why the implementation of the Istanbul Grain Initiative has become a significant factor in stabilizing world food prices.

According to Ukrinform, almost 33 million tons of grain have been exported from Ukrainian ports since the launch of the grain corridor - 17 million tons of corn, 9 million tons of grain, 1.86 million tons of sunflower meal, 1.65 million tons of sunflower oil, and 1.27 million tons of barley. Also soybeans, rapeseed, sunflower seeds and other grains.

Among the top 10 countries where Ukrainian grain and other products were exported are China, Spain, Turkey, Italy, the Netherlands, Egypt, Bangladesh, Israel, Tunisia, and Portugal.

It should be noted that these countries are rather conditional consumers of Ukrainian grain, as some of them process it, for example, into flour (Turkey is the leader) and then send the processed products to poor countries in Africa and Asia.

It is no exaggeration to say that food supplies are key to social security.

A unique Ukrainian program launched with international partners under the auspices of the United Nations also worked in this direction: Grain From Ukraine.

This is an international humanitarian food program initiated by the President of Ukraine Volodymyr Zelenskyy and launched on the 90th anniversary of the Holodomor of 1932-1933, i.e. on November 26, 2022.

Its goal is to supply grain to the poorest African countries and address the problem of food shortages for 5 million people. For other ships, grain will be purchased at the expense of other countries. Grain under this program for poor countries has been purchased by developed countries and international organizations, including the U.S. Agency for International Development (USAID), which has announced its readiness to provide $20 million.

Russia's attempts to block the Black Sea grain corridor are essentially an attempt to destroy a competitor in the global food market in the form of Ukraine. In addition, it is an attempt to intercept Ukraine's successful Grain From Ukraine initiative and strengthen Russia's influence in the Global South, especially in Africa.

The world needs to understand that either the Black Sea grain corridor will be unblocked or Russia will create its own "grain belt" of influence in Africa

It is north of the African equatorial belt that Russia is forming its zone of influence through a series of military coups: Sudan, CAR, Mali, Burkina Faso, Niger.

This influence is formed both through "hard power" (Wagner PMC) and "soft power" - grain supplies. At a recent African-Russian summit in St. Petersburg, Russian President Vladimir Putin said that "our campaigns will get more, which means we will get more taxes. And if we get more taxes, we will share a part of our income with the poorest countries and supply certain amounts of food for free."

Thus, the choice facing the world is quite simple - either help Ukraine return to the global food market, which will allow for the resumption of rhythmic grain supplies to Africa and Asia. 

Or Russia will use grain as a weapon to restore its influence in Africa after losing it since the collapse of the USSR. And Russia will do this by creating a grain "equatorial belt".

That is, the choice of world geopolitics in the context of the Global South: either the Ukrainian Black Sea "grain corridor" or the Russian African "grain belt".

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