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UN’s grain-for-fertiliser plan holds little appeal for Moscow -Breaking


© Reuters. FILE PHOTO – Ears full of wheat can be seen near Zhovtneve in Ukraine on July 14, 2016. REUTERS/Valentyn Ogirenko/File Photo

(Reuters). Russia doesn’t have much to gain by agreeing to a U.N. offer that Ukraine unblocks its grain exports via Black Sea. This is in exchange for Western sanctions being removed from Belarusian and Russian fertiliser exports, Russia industry experts say.

    U.N. Secretary-General Antonio Guterres said last week he was in “intense contact” with Russia, Ukraine, Turkey, the United States and the European Union, urging “goodwill on all sides” to restore Ukrainian grain exports as a global food crisis worsens.

    But goodwill is lacking in Moscow, which has squarely blamed the Western sanctions imposed in response to Russia’s military campaign in Ukraine for the food crisis.

Dmitry Peskov (Kremlin spokesperson) said President Vladimir Putin was conscious of the “great threat” that current circumstances could cause hunger. But that Ukraine had blocked its exports from the Black Sea by mining it.

Dmytro Kuleba (Ukraine’s Foreign Minister) stated that Russia tried to “blackmail” international communities by raising the possibility for Russia to offer unblock Black Sea ports as a condition to a lifting of sanctions.

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Russia, which is the biggest exporter of wheat worldwide, often trades with Ukraine in order to provide food for the Middle East, and Africa.

The company expects record crops this year, as well as hefty sales in the July-June season. This is largely due to exports from large quantities of Black Sea ports, which remain open. However, Ukraine’s ports are blocked by Moscow since February 24, when it sent its troops into Ukraine.

Russian fertilizers are still available to some major export markets.

    “A swap like this won’t happen now,” said a Russian grain industry source, who asked not to be named due to the sensitivity of the issue. It’s most likely that the grain will be traded for more if it is.


Russia holds all the cards at this point.

    Global wheat prices are high due not only to disruption in the Black Sea but also to dry weather elsewhere and restrictions such as a ban on exports from India.

Chicago wheat futures reached a new record in March due to supply worries. They are up 30% from February 23. [WHT/]

    Russia is well placed to take advantage, as its record harvest combined with large carry-over stocks will mean a high exportable surplus in the new season.

Putin stated that Russia would increase its wheat exports during the July-June season because of an alleged record crop, which could reach 87 millions tonnes.

Sovecon and IKAR estimate that July-June’s wheat exports will be 39 and 41 millions tonnes, respectively. This is after approximately 33 million tonnes of this season.

According to the source, Russia is able to address the problem of global food safety – even if it does so at high costs. And Ukraine is free to wait.

Ukraine holds more than 20,000,000 tonnes of grain.

It exported nearly all of its cereals from Odesa before the conflict. This was at a rate of up to 6,000,000 tonnes per month. It can only manage 1-1.5 million freight trains now.

Andrei Rudenko, Russian Deputy Foreign Minister, stated to news agencies that Moscow is ready to offer a humanitarian corridor for ships carrying food without an escort from the West in exchange for lifting some of its sanctions.

However, this could also mean that the waters around Odesa (the principal deep-sea harbor in Ukraine) would be deminated. Kyiv worries about an amphibious invasion.

Peskov declared that “if this entire tangle is substantively discussed by some countries in contact with Russia, then I am certain that we’ll be prepared to discuss it.”

Ukraine stated that it requires “guarantees” of security. Taras Kachka, deputy economy minister to Ukraine, told Reuters last week the country would benefit from having “vessels in third countries within the region…

Moscow could be more interested in swapping in August or September, when Ukraine is short on space for its new crop. It is possible that the old crop still occupies 35% storage capacity.

Russia may demand more fertiliser exports than ever before.


Russia is the largest producer of crop nutrients with potash, nitrogen, and phosphate in the world, accounting for 13%. It usually exports these crops to Latin America and Europe as well as Asia, Africa, and Asia.

    Belarus, Russia’s ally, is also a big producer of potash, and its exports, like Russia’s, have been hit by sanctions.

According to a source within the Russian fertilizer industry who declined to identify himself, Russia is still selling complicated fertilisers to Latin America, India and Brazil, but potash made from Russia or Belarus is more difficult to export abroad.

Russia exports wheat and vegetable oils worth $9 billion, $4 billion, respectively in 2021 according to the customs agency. It also exported fertilisers valued at $12.5 billion. Trade data have been withheld since April.

The source said the current problem was not only Western banks refusing to transfer payments because of sanctions, but also the difficulty of securing large vessels, for the same reason.

Russia and Ukraine jointly account for 29% and 80% respectively of the global exports of wheat oil. Ukraine is also a significant corn exporter.

    Global prices for wheat, vegetable oils, fuel and fertilisers have all jumped since Russia began its military campaign.

According to another source, the Russian fertiliser sector saw no chance for farmers to be able address the current food crisis.

He said that even if Ukraine resumes exports of grain from the Black Sea, it will not be sufficient to replenish global supplies. Farmers around the globe did not use enough fertilizer for spring plantings and may find it difficult to purchase enough for autumn sowing.

    “So the 2022/23 farming year will be hungry and cold,” the source added. “You reap what you sow, and how much. They will reap the whirlwind.