Wheat floats on – Kommersant
[ad_1]
The grain deal, which Moscow still has questions about, was extended on Wednesday for another two months. In fact, this is a technical pause, during which the political future of its initiator, Turkey, should be determined, as well as the economic consequences of various scenarios for the development of events for the European Union, which remains one of the prominent buyers of Ukrainian grain. The fulfillment of the obligations of the parties to the transaction to the Russian Federation depends on the same circumstances. For Russia itself, taking into account the high export rates of Russian grains, the prolongation of the Black Sea Grain Initiative itself does not change practically anything economically, but it allows us to maintain hope for the removal of some of the financial, logistical and technological sanctions from its agricultural complex.
On Wednesday evening, with less than a day left before the expiration of the Black Sea Grain Initiative, Turkish President Recep Tayyip Erdogan announced its extension by two months. Such a period, combined with Russia’s continuing claims to the fulfillment of its conditions (this is the connection of the Russian Agricultural Bank to SWIFT and the lifting of restrictions on the export of fertilizers and the import of spare parts for agricultural machinery) indicates that the decision on the future of the agreement de facto has only been postponed. The pause (and its duration) is partly explained by the fact that none of the participants in the deal wanted to create unnecessary problems for its initiator, Tayyip Erdogan.
Recall last Sunday in Turkey held a general presidential election. According to the results of the first round, Mr. Erdogan was ahead of his main rival, Kemal Kilicdaroglu, by less than 5%, and the coming days, in anticipation of the second round scheduled for May 28, will be difficult for both politicians.
The grain deal has been and remains one of the main foreign policy achievements of the President of Turkey over the past year and a half, its failure could be a serious blow to him.
At the same time, it is Mr. Erdogan, with the support of the UN, who insists on observing the Russian terms of the deal, including the return of Rosselkhozbank to SWIFT. Turkey is negotiating with the United States and Europe. However, Kemal Kılıçdaroglu, as follows from his statements, is also in favor of extending the deal. However, if he wins, discussing its terms with him in the face of political changes in Turkey will also take time – which, apparently, is “included” in the declared two months.
Time is also needed to calculate the economic consequences of the failure of the deal for the European Union. For the EU, which is the buyer of about a third of the export of Ukrainian grains and oilseeds (to support the country’s economy, the union zeroed out duties on their supplies), such imports represent a partial solution to one problem and the creation of another. Cheap agricultural raw materials from Ukraine slowed down the growth of food prices – the contribution of prices for agricultural raw materials and energy to the overall inflation rate in the EU a year ago was about 60%, now, after their return to levels before the start of the Russian military operation in Ukraine, it is 9%, fixes the May macro forecast European Commission. However, the surge in prices has already been transferred to the cost of prepared food, and food inflation continues to reach highs – 15.7% yoy in March, and its contribution to the overall figure for the year increased from 10% to 30%. At the same time, the flow of Ukrainian grain caused a local collapse in prices, protests from farmers in Eastern Europe and the blocking of “corridors of solidarity” – to remove it, the European Commission had to promise them to compensate for the losses for the month with a payment of € 100 million, postponing the choice of a systemic solution for “technical study of the issue ” (cm. Kommersant-Online). Failure of the deal would increase the burden on the “corridors” (the volume of grain export by sea is one and a half times higher than land) and the growth of discontent among European agricultural producers. The extension, however, makes it possible to pause until a political decision is made on Europe’s readiness to comply with Russian conditions.
Demands to lift sanctions on payments for Russian foreign trade in grain and fertilizer exports remain key for the Russian side. Based on their implementation, the Russian Federation, as stated in Moscow, agreed to extend the agreement. In Kiev, the extension of the agreements was called “unfreezing the deal”, hinting that in recent weeks the Russian side did not comply with the terms of the agreement, periodically blocking inspections of ships with grain necessary to send them according to the agreed schedule. The reduction of Ukrainian exports was previously recorded by the UN (see. “Kommersant” dated May 12). The agreement of the Russian Federation to extend the deal does not guarantee the return of ship inspections to the pace of previous months, especially since the Russian side explains the delays by the need to comply with quality standards. At the same time, the slowdown in the implementation of the deal does little to threaten the Russian Federation itself – non-compliance with the Russian package of conditions has not yet affected its exports. This is confirmed, in particular, by the data of the US Department of Agriculture, judging by which the export of some types of grain this season may even become a record (see. “Kommersant” from May 16).
Meanwhile, the news about the extension of the deal led to a decrease in quotations for wheat in Chicago by more than 4%, says Andrey Sizov, director of Sovecon, stressing that prices for it on world exchanges were already under pressure, but uncertainty about the extension of the deal supported them. . In the short term, the decline on the news may continue, but its potential is limited, as the market as a whole expected this event, adds Mr. Sizov.
As Sovecon reported, on Tuesday, wheat on the Chicago exchange traded at $238 per ton, 2% cheaper than the day before.
According to the Institute for Agricultural Market Studies (IKAR), which cites Reuters, Russian wheat with 12.5% protein last week averaged $254 against $265 per ton a week earlier (FOB). The general director of Prozern, Vladimir Petrichenko, notes that the extension of the deal will most likely lead to a continued decline in wheat quotes on world exchanges to the level of prices for a new crop. According to him, the next time the issue of extending the grain deal will be considered in the new season, which will begin on July 1. And IKAR CEO Dmitry Rylko does not expect a noticeable market reaction to the news about the extension of the deal, indicating that the decision was expected and already reflected in prices.
[ad_2]
Source link
