Higher global wheat price looms as UN, Russia deal uncertain

Tuesday May 02 2023
Wheat plantation in Ukraine

Ukrainian farmers on July 19, 2022 harvest a wheat field in Kharkiv region, amid Russian invasion of Ukraine. PHOTO | SERGEY BOBOK | AFP


Kenya is staring at elevated wheat prices in the coming months should Russia fail to renew a United Nations-brokered deal on grain passage along the Black Sea this month (May).

Russia said it would not renew the Grain Initiative deal, first reached last year if the US and European Union did not lift the sanctions they have slapped on Moscow.

The current deal, which allows grain from Ukraine to pass through the Black Sea Channel, is due to expire on May 18.

But Russia has repeatedly said it will not permit the deal to be extended unless the West removes obstacles to Russian grain and fertiliser exports.

Russia's concerns

Moscow has raised concerns that restrictions on its payments, logistics and insurance industries imposed over its military actions in Ukraine, restricting it from exporting its grains and fertilisers.


“The deal is not a buffet you can pick and choose from,” Russian Foreign Ministry spokeswoman Maria Zakharova was quoted as saying by news agency Reuters.

One of Russia’s main demands in negotiations is the reinstatement of the Russian Agricultural Bank (Rosselkhozbank) to the Swift payments system.

Moscow was suspended from using the Swift system, making transactions between it and other countries impossible.

Wheat processors argue that should the deal not be renewed, then the cost of flour and bread will remain at the current high levels or even rise as Kenya is a key market for Ukraine wheat.

“I hope that the deal will be renewed, if not so, then the price of wheat will go up again,” said Bimal Shah, chief executive of Broadway Group of Companies.

The global price of wheat has dropped to $360 per tonne from a high of $520 last May, the highest cost recorded in the past 11 months.

Kenya, which imports up to 75 percent of the annual wheat requirement, has exhausted the local stocks and is currently relying on imports to meet the growing demand for the grain in the country.

Russia and Ukraine account for over a third of the world’s total wheat with any disruption in supply having serious ramifications on countries that rely on imports to bridge their deficit.