Will the Black Sea grain agreement, help reduce grain prices in Iran?

In the latest report of Iran Statistics Center, the annual inflation rate for urban households is 9.38 percent and for rural households is 8.41 per cent. Both rates have increased compared to May of this year.

The general inflation rate in Iran did also increase; again, according to Iran Statistics Center, during the month of June, the prices of food and beverages increased by 52%. With the agreement signed in Turkey by Ukraine and Russia on Friday, July 22, 2022, after lengthy negotiations led by the UN and the host country, the hope that grain prices will go down in the world including Iran is increasing.

The Deal

According to the agreement, it was decided that Ukraine will direct ships carrying grain out of the ports of Odessa, Yuzhne and Chornomorsk; a joint command center with the presence of Ukrainian, Russian, Turkish and United Nations officials will be established in Istanbul to monitor the movement of cargo.

The ships will sail into Turkish waters, and here they will be inspected by the four-party team officials. They will then move on to deliver the much-needed grain in ports around the world. The ships will be inspected again by the same team before returning to Ukraine. In the signed agreement, it states that the main responsibility of the inspection team is to check “unauthorized cargo and personnel on ships entering or leaving Ukrainian ports”. One of the main demands of Russia was that ships returning to Ukraine should not carry weapons. The parties have agreed that ships and port facilities used for export will be protected against any kind of military action.

Beacon of Hope

“Today, there is a light in the Black Sea,” the UN Secretary-General, Mr. Antonio Guterres said in his speech just before the signing ceremony, stressing that the deal focuses on what matters to the people of our world. “A beacon of hope - a beacon of possibility - a beacon of peace - in a world that needs it more than ever.”

The operation is expected to begin transporting five million tons of grain per month. At this rate and given that 2.5 million tons are currently transported over land and on rivers to Ukraine’s neighbors, stocks of nearly 20 million tons should be depleted within three to four months. This process frees up storage space for new harvests in Ukraine.

Officials say the deal has the potential to increase the flow of wheat to Somalia within weeks, averting the threat of a full-blown famine, and it should lead to a gradual decline in global grain prices. But given the fragility of the agreement, it is unlikely that the grain market will return to normal immediately.

Reassuringly, the European Union issued a legal clarification on its sanctions on Thursday, saying that various banks and other companies involved in the grain trade would not in fact be targeted.

The United Nations also announced that it held talks with the private sector with similar assurances from the US, and trade from Russia - especially the port of Novorossiysk - should accelerate activities. Mr. Guterres thanked President Erdogan and his government for facilitating the negotiations that led to the agreement. He also thanked the representatives of Russia and Ukraine for putting aside their differences for the common interests of humanity. “It has not been a question of what is good for one side or the other,” he said. “The focus has been on what is important to the people of our world. And let there be no doubt - this is a deal for the world.”

According to the report of the UN Food and Agriculture Organization (FAO), Ukraine is one of the world's leading exporters of cereals and their country annually supplied more than 45 million tons globally. The almost five-month-old conflict between Russia and Ukraine caused food and fuel prices to plummet and added to supply chain problems resulting in mountains of grain stocks stuck in silos.

In addition to stabilizing global food prices, Mr. Guterres said the agreement would “bring peace to developing countries on the brink of bankruptcy and the most vulnerable on the brink of famine”

“Since the start of the war, I have emphasized that there is no solution to the global food crisis without ensuring full global access to Ukrainian food products and Russian food and fertilizer.” The UN Secretary-General acknowledged the “long road” and weeks of round-the-clock negotiations leading to the landmark agreement.

The Long Road

In April, the UN Secretary-General met with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky to present a plan. He said the UN “has been working every day since then.” Two UN task forces were set up in parallel with these talks - one focused on transporting Ukrainian grain through the Black Sea, led by UN humanitarian chief Martin Griffiths, and the other on facilitating access to food and Russian fertilizers, led by Rebecca Greenspan who is the Secretary-General of the United Nations Conference on Trade and Development, UNCTAD. Mr. Guterres pledged that the United Nations would fully adhere to the agreement and called  on all parties to do the same.

“Thanks to the collective efforts of many, the beacon of hope shines brightly in the Black Sea today. In these tumultuous and tumultuous times for our region and our world, let it guide the way to alleviating human suffering and securing peace,” said Guterres. Together, Russia and Ukraine export about a third of the world’s wheat and oats, and Russia is the largest producer of chemical fertilizers in the world.

400 million people around the world depend on the Ukrainian grain supply. The Food and Agriculture Organization of the United Nations (FAO) predicts that 180 million people in 41 countries will face a food crisis and hunger this year.

The answer to the initial question, if grain prices in Iran will follow the expected global decrease, is hard to give. 

Iranian Prices

Global prices did fall a tiny bit since Friday, but not enough to impact prices in Iranian supermarkets.  And it is too early to say what will happen from now on. The development of the conflict is one deciding factor.  Another is that the Government has encouraged Iranian farmers to produce more wheat for domestic use. Too early to know, but if the harvest is successful, that could positively impact consumer prices, too. And a last factor is, that even though prices spike quickly during crisis, high prices tend to stick, even if the situation changes.

News Code 194155

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