21st Century Business Herald reporter Shu Xiaoting reported in Beijing
The geopolitical conflict has lasted for 5 months, and the smooth flow of food trade has ushered in a glimmer of light, while still facing uncertainty.
According to reports, Ukraine plans to start grain shipments from Ukrainian Black Sea ports this week. Ukrainian Infrastructure Minister Kubrakov said on July 25 that the internal technical documents on the joint coordination center for the export of agricultural products from the Black Sea ports will be completed in the next two days, and the coordination center is expected to start operation on the 27th.
On July 23, the port of Odessa was attacked. Russian Presidential Press Secretary Peskov said on July 25 that the Russian armed forces’ strike on the military infrastructure of the Ukrainian port of Odessa “will not and should not” affect the agreement on the export of agricultural products from the Black Sea port signed in Istanbul, Turkey. Started grain transportation.
Earlier, Russia and Ukraine reached a “parallel agreement” on the export of agricultural products. On July 22, representatives of Turkey, Russia, Ukraine and the United Nations held an agreement signing ceremony in Istanbul, Turkey on the issue of exporting agricultural products from Black Sea ports. The content of the agreement includes: establishing a coordination center in Istanbul and ensuring the safety of food transportation, Russia and Ukraine agree that neither party will attack the ships carrying agricultural products, and the Istanbul coordination center will be designated by all parties to jointly manage the ships entering and leaving the port, including Odessa. Three Ukrainian ports, including the port, will begin to export grain and fertilizers.
“This unprecedented agreement is the ‘beacon of hope’ that the world desperately needs.” UN Secretary-General António Guterres said at the signing ceremony of the Black Sea Food Initiative on the 22nd that the agreement will help stabilize the conflict before it escalates. International food prices have reached record levels.
take a critical step
According to Xinhua News Agency, Ukraine’s Minister of Infrastructure Kubrakov said on July 25 that Ukraine plans to start grain shipments from Ukrainian Black Sea ports this week. The formulation will be completed in the next two days, and the coordination center is expected to start operation on the 27th. Kubrakov said that the resumption of the opening of the Black Sea ports is expected to bring additional benefits of 1 billion US dollars to Ukraine, and the monthly export volume of agricultural products will reach 3 million tons.
On July 22, representatives of Turkey, Russia, Ukraine and the United Nations reached an agreement on the issue of the shipment of agricultural products from Black Sea ports. On the same day, Russia and the United Nations signed a memorandum of understanding on the export of Russian agricultural products. Russian Foreign Minister Sergei Lavrov stated that the memorandum of understanding aims to ensure unimpeded access to the world market for Russian grain and fertilizers, remove obstacles created by the United States and the European Union in the fields of finance, insurance and logistics, and provide for Russian grain and fertilizers affected by restrictive measures. Exports seek exemptions. The memorandum is valid for 3 years.
Ukrainian President Volodymyr Zelensky said in a video speech on the evening of the 22nd that the signing of the agreement will lift the blockade of Ukrainian ports, and Ukraine’s backlog of 20 million tons of grain will be exported, and the grain that is being harvested this year is also expected to be sold.
With the conflict between Russia and Ukraine disrupting existing food trade flows, the food deal reached was hard-won and was called a “beacon of hope” by UN Secretary-General António Guterres. Guterres said on July 22 that the signed agreement has opened up the way for a large amount of grain to be exported from the three important ports of Odessa, Chernomorsk and Yuzhny in the Black Sea region. The food supply gap will reduce the impact of high food prices.
Li Chunding, director of the Department of Economics and Trade of the School of Economics and Management of China Agricultural University, also pointed out in an interview with a 21st Century Business Herald reporter that the initiative on Ukraine’s food security transportation and the memorandum signed by Russia and the United Nations to promote Russian grain and fertilizer exports are of great significance. It is a key step in ensuring global food security, and can effectively promote the export of grains and other agricultural products between Russia and Ukraine, which is conducive to expanding global food supply, stabilizing global food prices, and maintaining global food security, especially for North Africa, Europe and other regions. Food tensions have eased.
Follow-up needs to pay attention to the implementation of the agreement
“If we cannot ensure the supply of Ukrainian food and Russian food and fertilizers to the global market, then we cannot solve the food crisis facing the world.” Guterres said on the 22nd.
Judging from the importance of Russia and Ukraine in grain trade, Ukraine is one of the top five grain exporters in the world, supplying more than 45 million tons of grain to the global market every year. Ukrainian wheat exports accounted for 11.6% of global exports, barley 17.5%, rye 39.9%, corn 16.4%, rapeseed 20%, sunflower oil 49.8% and sunflower meal 60.8%. The total proportion of wheat exports from Russia and Ukraine is about 30%. In 2021, more than 10% of the total wheat imports of 36 of the 55 countries with food crisis will come from Russia and Ukraine.
Objectively speaking, although the grain agreement reached on July 22 promises to ensure the safe delivery of Ukrainian grain and related products to the global market, the implementation of the subsequent agreement also faces some challenges.
Shi Hengyu, chief analyst of oils and oils at the China-Thailand Futures Research Institute, told reporters that follow-up attention should be paid to the implementation of the agreement, especially the speed of capacity recovery. He explained that in terms of logistics, the Black Sea port is Ukraine’s only outlet through international shipping routes. After the Russian-Ukrainian military conflict, the export execution of old crop stocks of agricultural products was almost stagnant, and only part of the car shipments to other European countries on the west side of Ukraine The line is still running normally. The signing of this agreement will hopefully promote the recovery or even acceleration of Ukrainian agricultural exports. However, since the operation of shipping routes in Ukraine has been stagnant for a long time, cargo ships on related routes may have been transferred to other regions, and it may take some time for the recovery of capacity after the port restarts. Under the circumstance of tight transportation capacity in the initial stage of export, it cannot be ruled out that the freight rate of related routes is relatively high, which leads to the fact that the CNF quotation actually obtained by the importing country is still at a relatively high level.
However, Shi Hengyu added that with the gradual recovery of the supply-side tension and the successive harvest of spring crops in the northern hemisphere in the third quarter of this year, the global grain trade order will gradually return to normal.
From a longer-term perspective, Li Chunding pointed out that the crux of the risk of food supply lies in “not suffering from widowhood but suffering from unevenness”, that is, different external shock pressures in the world lead to uneven distribution of global food, and some countries do not have enough financial resources to purchase food and meet Domestic food consumption demand, which leads to problems such as social unrest brought about by hunger.
In this regard, Li Chunding suggested that countries around the world should continue to strengthen food governance and cooperation, coordinate and ensure the smooth flow of food trade, reduce the risks of poverty and hunger through aid and other means, and improve the availability and affordability of food. To jointly resist the negative impact of external emergencies.
Agricultural prices may fluctuate down
The current round of gains in global commodities, including grains, oils and fats, began in mid-2020. “Price drivers mainly come from the loose monetary policies generally implemented by central banks around the world under the influence of the new crown epidemic, extreme weather and other factors and the tight supply side of commodities themselves.” Shi Hengyu pointed out.
Since the end of February this year, with the escalation of the conflict between Russia and Ukraine, the global agricultural prices have shown a rapid growth momentum, and the prices have declined in the past three months. From the perspective of macro-influencing factors, Shi Hengyu said that the central banks of European and American countries took the initiative to reduce the year-on-year growth rate of broad money after New Year’s Day this year, and began to introduce monetary tightening measures such as interest rate hikes to recover liquidity at the end of the first quarter. In June, the Federal Reserve raised interest rates by 75 basis points at its meeting on interest rates. Affected by this, the prices of global commodity futures, including agricultural products, fell sharply and rapidly. Combining historical experience and the current situation, the direction of monetary policy tightening by central banks in Europe and the United States is expected to continue this year, which will continue to suppress the commodity market.
Li Chunding also pointed out to reporters that the rise in international food prices is largely affected by the risks brought about by the speculation in the futures market. With the withdrawal of the quantitative easing monetary policy by the Federal Reserve and other central banks, the global excess liquidity situation has eased, and the speculation of agricultural futures has decreased, thereby driving down food prices.
From the perspective of supply and demand fundamentals, Li Chunding said that the previous increase in food prices stimulated countries to increase food supply, and the northern hemisphere ushered in the summer grain harvest, which eased the tight supply situation and gradually decreased prices. At the same time, the Food and Agriculture Organization of the United Nations, the World Food Program of the United Nations, the World Trade Organization, etc. promote global food governance, promote the liberalization and facilitation of food trade, and call on countries to reduce restrictions on food import and export trade. The relevant consensus and policies reached are conducive to international Food prices fell.
Wang Chengqiang, director of the New Era Futures Research Institute, told reporters that the signing of the Ukrainian Food Safety Transportation Initiative has further eased the risk of food supply shortages, and the prices of grains and oils have followed the general trend of bulk commodities and achieved a rapid decline process of “de-foaming”.
Looking forward to the market outlook, Wang Chengqiang pointed out that factors such as extreme weather, geopolitical conflicts, trade protectionism, and de-globalization have magnified the prospect of commodity market volatility. Specific to the price trend of agricultural products such as wheat, it is necessary to focus on the impact of the weather during the planting and growing season of agricultural products on the total supply and the impact of the rise and fall of the macro economy on the total demand.
Currently, the agricultural product market is negatively impacted by worries about an economic recession. However, Wang Chengqiang pointed out that the market has not fully focused on the risks brought by the unexpected development of La Niña to the output of agricultural products, and this influencing factor may continue to disturb the futures prices of agricultural products in the next six months.
Shi Hengyu said that under the influence of the “Double La Niña” weather pattern in the equatorial Pacific region this year, spring crops in the northern hemisphere have generally suffered from high temperature and dry weather during the key growth period, and the growth and yield of some crops may be threatened. From the index point of view, the actual growth of major oilseed varieties represented by North American soybeans and rapeseed is not greatly affected by the negative weather.
As far as oils and fats are concerned, Shi Hengyu said that the event that has a greater impact on the market in the short term is the release of Indonesian palm oil inventory pressure. After June, the Indonesian government lifted the previous ban on palm oil exports, resulting in a sharp increase in the short-term pressure on the global vegetable oil spot supply. Judging from the data, the monthly export volume of Indonesian palm oil is about 3 million tons. During the period when the Indonesian government temporarily banned the export of palm oil from April 28 to May 23, due to the relatively weak demand side, as well as soybean oil, rapeseed oil, The supply of other vegetable oils such as sunflower oil is relatively abundant, and international oil and fat prices have not risen sharply. After Indonesia resumed palm oil exports, the international market increased its supply by 3 million tons per month, which is equivalent to a one-year gap in the supply of Ukrainian sunflower oil caused by the Russian-Ukrainian conflict.
“In the long run, considering the changing trend of the structure of the current annual supply and demand balance sheet, the global supply of grains and oilseeds will recover significantly after the third quarter, and the rhythm of the market will remain volatile and downward as a whole.” Shi Hengyu pointed out .
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