Asia-Pacific could face higher prices of grains and meat after Russia suspended a U.N.-brokered deal that had allowed safe grain shipments out of the Black Sea.
Over the weekend, the Russian foreign ministry said it “can no longer guarantee the safety of civilian dry cargo ships participating in the Black Sea Grain Initiative and will suspend its implementation from today for an indefinite period.” This followed an Ukrainian attack on its fleet in Sevastopol.
Meat production and consumption are key in Asia and for many Asian countries, grains such as wheat, corn, and soybeans are needed for animal feed to produce beef, pork, poultry as well as fish, authors Genevieve Donnellon-May and Paul Teng wrote in a research note published by Singapore think tank RSIS.
Major Black Sea exporters Russia and Ukraine account for about a third of the world’s wheat exports, 15% of the world’s corn exports and about 2.1% of the world’s soybean exports, the pair said, adding that Asian countries are particularly hit because many import from the region.
“For consumers in Asia, expect to pay even higher prices for food, including for meat, due to the prolonged conflict alongside rising energy costs and inflation,” Donnellon-May told CNBC.
“It’s going to get worse in Asia-Pacific with countries impacted by higher [priced] fertilizer, fuel, and food prices, further exacerbating Covid-related disruptions to the supply chains and climate change-induced extreme weather events, which have impacted agricultural production and food security.”
“Consumers throughout Asia-Pacific should expect to pay more for basic foodstuffs and also for meat.”
1 million metric tons less of cereals in the market could create an increase in prices of around 0.5%
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Before Russia halted its participation, the Black Sea Grain initiative had unlocked 9 million metric tons of grain worth $3 billion, said Maximo Torero, chief economist of the United Nation’s Food and Agriculture Organization.
“In practical terms, it means that 1 million metric tons less of cereals in the market could create an increase in prices of around 0.5%. So, the short-term impact shouldn’t be too big,” Torero told CNBC’s “Squawk Box Asia” on Monday, adding that the longer the situation prevailed the higher prices would rise.
Describing the situation in the Black Sea, Torero said there were 97 loaded vessels waiting to depart, 15 inbound vessels waiting for inspection and another 89 which had applied to join the initiative.
The latest update of the FAO’s food price index indicated global food prices had fallen for the sixth month in a row in September. Cereal prices fell too but leapt in September on fears about the Black Sea Grain Initiative’s continuation beyond November.
Donnellon-May said Asia-Pacific countries that could be hardest hit by the latest development in the Black Sea include Indonesia, which recently booked Ukrainian wheat cargoes, and Pakistan, where a government agency recently bought about 385,000 tons of wheat, likely from Russia and Ukraine.
Laos, Thailand, Malaysia, Sri Lanka and Bangladesh too could struggle.
The U.N. and other international bodies have urged Russia to walk back its decision on the grain deal.