Has global food security been improved by the Black Sea Grain Initiative?

World food prices remain high over a year since Russia invaded Ukraine. An agreement on grain exports signed by both countries has somewhat eased global supply, but disruptions to production remain a serious threat to food security worldwide.

It has been over a year since Russia fired its first set of missiles at more than half a dozen Ukrainian cities, including the capital, Kyiv. Since then, Ukraine – nicknamed the ‘breadbasket of Europe’ – has been limited in its ability to supply Europe and the rest of the world with grains.

Several attempts to reduce tensions have proved unsuccessful with few exceptions. But on 22 July 2022, Russian and Ukrainian officials signed the Black Sea Grain Initiative in Istanbul, Turkey. This significant and ‘successful’ agreement, brokered by the United Nations (UN), enabled the safe passage of Ukraine’s grain exports through three ports: Chornomorsk, Odesa and Yuzhny/Pivdennyi.

More than six months on from the signing of the agreement, the export of grains from Ukraine has been eased, but production is still hampered. Consequently, while the deal has improved global food security, concerns remain.

How have food exports from Ukraine affected global food supply?

The unblocking of the Black Sea has significantly improved global food supply conditions by raising grain exports from Ukraine. According to the UN Black Sea Grain Initiative Joint Coordination Centre, since the agreement was signed, over 27 million tonnes of grain and other foodstuffs have been exported through the Black Sea (as of April 2023). This is a 170% increase in total grain exports between February 2022 (when the war began) and June 2022 (one month before the signing of the deal).

The leading product is maize (50%), followed by wheat (27%) and sunflower products (11%). These staple food items are economically and nutritionally significant, especially in developing countries where most of the world’s poorest people live.

The return of commercial activities to the Black Sea, coupled with the effective storage of grains during the six-month blockade (March to July 2022), saw grain exports increase (especially for maize and wheat). They even went above seasonal averages for September and October – the months following the signing of the agreement (see Figure 1). Emptying the storage facilities will provide more space for future harvests and exports.

Figure 1: Ukraine’s corn and wheat exports in 2022 compared with 2017-21 seasonal averages

Source: United States Department of Agriculture (USDA), 2023

While some progress has been made in terms of food supply, grain exports from Ukraine are still 32% below 2021 (pre-war) figures. Figure 2 shows that the shares of Ukraine’s production and exports in global production and exports of major agricultural commodities have not returned to pre-war levels.

For example, Ukraine, which boasted 12% of international maize exports in the 2021/22 marketing year, could only contribute 4.9% to global exports in 2022/23. The exports backlog results from shortfalls in agricultural production, as revealed in Figure 2.

Food production has not matched levels in the years before the conflict. The agricultural deficit fuelling the exports lag will subsist with the conflict continuing in many parts of the country. Opening up the Black Sea alone, without addressing production-related obstacles, might not restore the global food supply balance.

Figure 2: Ukraine’s share of world production and exports of agricultural commodities, 2021-23

Source: USDA, 2022

Where are the exports going?

Food security entails food production, appropriate distribution and easy access. While food production is being shored up globally, those living in poorer countries have often been distributed to the least. Despite their larger populations, low- and lower-middle-income countries received less than 20% of grain exports from Ukraine as of January 2023 (see Figure 3).

Could Ukraine’s exports to mainly high-income countries be motivated by pecuniary purposes to fund the war – an action I refer to as ‘food-for-funds’? In practical terms, developing economies do not seem to benefit as much from the grain initiative as their developed counterparts

Without equitable food distribution, attaining global food security (one of the UN’s Sustainable Development Goals) by 2030 could become elusive, even with a surge in food exports and supply following the Black Sea Grain Initiative.

Figure 3: Global distribution of Ukraine’s exports under the Black Sea Grain Initiative (as of January 2023)

Source: United Nations Conference on Trade and Development (UNCTAD), 2023

How much have food prices changed?

Shortages of food due to export restrictions during the initial blockade resulted in food prices around the world rising to all-time highs. With static or very marginal increases in income, real income for most households nosedived dramatically. This was especially the case in developing countries where poor households spend a large proportion of their incomes on food.

So, how have food prices adjusted to the re-opening of export activities within the Black Sea? If we follow simple principles of economics, we expect prices to fall as supply increases with constant demand. Unfortunately, the real world is not so simple. So, to find out more we must turn to statistics.

Looking at the recent data, global food prices appear to be falling. Specifically, international prices for maize and wheat for February 2023 are almost at the same level as they were a year ago. Nevertheless, they are still higher than before the invasion.

The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, averaged 126.9 points in March 2023, compared with 131.8 for December 2022.

Figure 4 shows that the FAO food price index has been falling consistently since April 2022, even before the Black Sea Grain Initiative was signed. Some commentators attribute the pre-initiative fall to the establishment of solidarity lanes. These are routes created by the European Union (EU) on 12 May 2022 to help Ukraine to export its agricultural products. Others attribute it to the role of expectations of a grain deal being signed.

Figure 4: FAO price index

Source: Data from UN FAO, 2023

Studies show that changes in international food prices partly affect local food prices (Bekkers et al, 2017; Dillon and Barrett, 2016). But in the current context, this ‘pass-through’ effect is not fully reflected in local food prices.

Many local markets, especially in developing economies, are still under substantial stress due to supply not matching high food demand locally. As a result, food prices are still snowballing in many developing countries.

For example, in March 2023, food inflation climbed to over 24% year-on-year in Nigeria, at the same time as some European countries have been cautiously celebrating a fall in global food prices. The reason for this apparent paradox in the relationship between global and local food prices is well documented in previous research.

Generally, local prices do not fall as fast as they rise. This is known as the ‘sticky price’ model in economics, propagated by John Maynard Keynes in his famous book The General Theory of Employment, Interest and Money.

Also, since the grain initiative is a temporary measure, there is uncertainty around whether Russia can be trusted to keep its side of the agreement or if it will extend it after the present scheme expires.

More importantly, other determinants of local food prices, such as fertiliser and fuel prices, are still rising. Higher transport and storage costs will erode the gains from any fall in international food prices.

Unless something is done to cut fertiliser and fuel prices (input costs), local markets may remain stressed for a long time. If the current conditions persist, everyone’s cost of living will be negatively affected in the long run: high food prices in developing economies and high energy bills for advanced economies.

What next?

Before the war, 55% of Ukraine’s land area was used for arable farming. In this highly fertile country, agriculture provided employment for 14% of the population. These two factors explain the country’s significant production and exports of grain globally.

War destroys farms, erodes soil and displaces farmers, thereby reducing farm outputs. If the war continues, Ukraine may not be able to meet its pre-war level of agricultural production. The Black Sea Grain Initiative has helped to boost food security through exports, but not through production. If production is not reinforced, exports will eventually fall, and global food security might once again be threatened – low supply coupled with high prices.

The uncertainty surrounding the longevity of the initiative indicates that we cannot hang the hope of millions of households depending on food exports from the breadbasket of Europe on a fragile grain agreement.

Russia has agreed to extend the agreement by another 60 days after the expiry of the second term on 18 March 2023, though not without conditions. But it is unclear what will happen when this round of the agreement lapses. To forestall a future cycle of a global food crisis, the best option is for the war to end.

Where can I find out more?

The United Nations Conference on Trade and Development (UNCTD) document provides a robust insight into the impacts of the Black Sea Grain Initiative.
A briefing by the US Department of States discussing the importance of the grain deal for global food supply.