I spent most of July on business travel to Gabon and Cameroon. Based on my observations during my site visits, I can say that the grain crisis caused by the Russia-Ukraine war has had a very negative impact on the African continent.
Ever-increasing wheat, flour, oil and grain prices are making it difficult to meet even the basic food needs of the continent. Flour producers, food wholesalers and bread production facilities in Africa have come to the point of losing almost all of their profit margins in the face of uncontrollably increasing grain prices.
Imbalances
So how did the chain of events that triggered this grain crisis in the world begin? Let’s look at this issue together. With the entry of Russia into Ukraine on February 20, a very black page was opened in world trade as the global conjuncture. Imbalances that started with the increase in oil and gold prices continued with the serious increase in food and energy prices. Finally, the Euro, the currency of the European Union, experienced a serious depreciation and met at the same parity level with the American Dollar.
These factors have dealt a fundamental blow to the trade and money flow in the world, and the African continent has taken its disagreeable share from this situation.
Let us now examine the latest developments that can be considered positive. Even the United Nations Secretary General’s statement that “The world will face a serious hunger crisis very soon”, many countries’ simultaneous food deprivation, and the exorbitant increase in food prices pushed the Western countries to take urgent action. In this respect, Turkey – which has maintained the best relations with both Russia and Ukraine since the beginning of the war and assumed the role of mediator – took the initiative and made the necessary move to open a grain corridor in the Black Sea. When the UN’s tours of convincing the EU and the USA also yielded a positive result, Russia and Ukraine sat at the table in Istanbul under the supervision of Turkey and the UN, giving the green light for a solution.
At the beginning of the war, Russian naval forces stopped Ukraine’s maritime trade by laying mines in Ukraine’s ports, especially Odessa. With this agreement signed on 25 July in Istanbul, a safe grain corridor was created in the Black Sea under the leadership of a representative committee established in Istanbul and grain-laden ships waiting on Ukrainian coasts, especially in the port of Odessa, will be sail out to differeng parts of the world. It is expected that 35 million tons of grain and sunflower oil will reach Africa, Asia, Europe and America within six to eight months.
Russian caveat
Before this, Russia had stated that it would sign this agreement only on one condition,which was removal of the food export embargo imposed on it by the Western states. As a result of the efforts of the UN, all parties shook hands (the USA and the EU), enabling Russian ships waiting in Yalta and Sevastopol ports to be opened to world trade again. “This is an agreement for the world,” said Antonio Guterres, UN Secretary General, said at the signing ceremony. “It will bring relief for developing countries on the edge of bankruptcy, and the most vulnerable people on the edge of famine, and to help stabilise global food prices, which were already at record levels, even before the war.”
Russia and Ukraine are the granaries of the world and meet 30 percent of all wheat produced in the world. With a very simple calculation, if we assume that one out of every three loaves of bread is produced in the world is made with grain from this region, it underlines the importance of the Ukrainian-Russian wheat brought back into world trade with the agreement recently signed in Istanbul.
The commercial value of the grain that has been trapped in ports and warehouses is USD15 billion. These products will arrive at world ports by passing through the Bosphorus/Istanbul, through the Sea of Azov. An estimated 5 000 commercial cruises will be made for shipment of related products. In my opinion, this is sufficient to indicate how big the problem that has been resolved was.
Serious hardship
As many of you have followed in my previous articles, I make business trips to the African continent on a monthly basis and closely following the pulse of both trade and people. Countries across Africa that were heavily or completely dependent on Ukraine and Russia for wheat have been pushed further into serious hardship. Bread is the most fundamental food item in many African countries, and both bread producers and the people have fallen into big trouble due to the price increases caused by the wheat crisis.
The doubling of wheat prices in a short time was also reflected in the prices of bread and food in general, and it dealt a serious blow to the African people who struggle to live with a fixed income. Within a year, the price of a ton of wheat increased from $ 200-250 to $400-450, leading to a spike in global food inflation. However, it seems that the difficult days are over. With the contribution of Turkey’s mediation, we are approaching what looks like good times ahead. I believe that the fluctuations in oil, flour, bread, salt, sugar, pasta and rice prices will be balanced with this security corridor agreement.
On the same day that this agreement was made, the US wheat stock market experienced a 5 percent depreciation and fell to the lowest level of the year. In short, with this initiative made under the leadership of Turkey, food security of 7.7 billion citizens of the world has been ensured. I hope that by the end of the year, when food prices also stabilise, African food producers and consumers will also breathe a sigh of reflief because trade will also come alive, cash begin to flow, and the danger of famine will end.
