2023-10-05 14:05:00
(CNN Spanish) — In April 2022, former Russian President Dmitry Medvedev, now deputy head of the Russian Security Council, said on his Telegram channel: “Our food is our silent weapon. Silent, but formidable.”
It is no longer silent. Russia is expected to reap a historically high wheat harvest for the second year in a row and is increasingly using that abundance to undermine Ukraine and gain global influence.
Despite Moscow’s claims that Western sanctions have strangled its food exports, Russia’s share of the global wheat market has grown dramatically since its large-scale invasion of Ukraine in February 2022.
It is expected to export 47.2 million metric tons (52 million tons) of wheat in the current season, which began in summer, according to S&P Global data shared with CNN. This will account for 22.5% of global wheat exports, a market-leading share. Two years ago, Russia exported 32.6 million tons, 16% of the market.
Farmers harvest wheat in the southern Russian settlement of Nedvigovka in July.
Over the same period, Ukraine’s share of global wheat exports has fallen from 9% to a projected level of just over 6% for this season.
Moscow’s words and actions suggest a determination to strip Ukraine of its position as one of the world’s leading wheat exporters, limiting its economy and, by extension, its war potential.
“Our country has the capacity to substitute Ukrainian grain, both commercially and in the form of free aid to countries in need,” declared the president of Russia, Vladimir Putin, at the summit of the BRICS group of developing countries, at the end of August.
These comments came just weeks after Russia will withdraw of the Black Sea grain agreement, which had guaranteed the safe passage of ships carrying grain from Ukrainian ports. Since the breakdown of the agreement, Moscow has intensified military attacks against Ukrainian export facilities. The attacks have damaged grain silos and infrastructure in both Ukraine’s seaports and its Danube river ports, which provide an important alternative route for exports and serve no military purposes.
“Their goal is to completely wipe out the Ukrainian agricultural sector,” Caitlin Welsh, director of the Global Food and Water Security Program at the Center for Strategic and International Studies, told CNN.
Wheat harvesters in the Siberian region of Novosibirsk, in September.
Achieving it would be a great prize for Moscow, given the importance of agriculture to the Ukrainian economy. Before the invasion, the sector represented 11% of the country’s gross domestic product.
“The exports [de grano] of Ukraine are vital to its economy and to feeding the world,” wrote on Monday Bridget A. Brink, the US ambassador to Ukraine, on X, formerly known as Twitter.
Wheat as soft power
However, experts say Russia’s actions are more than just an economic war against its neighbor.
The “free aid to countries in need” highlighted by Putin, they say, reflects Moscow’s desire to continue cultivating alliances with the developing world, especially African nations, many of which have so far refused to condemn the war. Russia in Ukraine, but they disapprove of its decision to withdraw from the grain agreement.
However, according to Andrey Sizov, director of SovEcon, a consultancy for the wheat and corn industries, this is more about public relations than genuine generosity. He points out that the 300,000 tons of grain that Russia promised in late July as aid to a handful of African countries is a small fraction of both Russia’s monthly exports and Africa’s needs. The latter amount to 8 million tons per month, he estimates.
“Russia wants to have good press, but the volumes are extremely small,” he told CNN.
Moscow’s withdrawal from the grain deal also provided a major new test for Europe’s united front in support of Ukraine. Three days after Russia’s departure, which derailed the agreement, five European Union countries bordering or close to Ukraine wrote to the European Commission, the EU’s executive arm, asking it to extend the temporary import ban until the end of the year. Ukrainian grain to those countries.
These nations, including Poland, feared being inundated with Ukrainian grain as more would now be exported by land to Ukraine’s neighboring and near-neighboring countries and, as was the case before the EU blocked shipments, some grain destined for transit could end up being sold in those countries. This, in turn, threatened the livelihoods of local farmers.
When the EU refused to extend the restrictions, several countries unilaterally banned imports, which gave rise to an unusual episode of public confrontation between Ukraine and Poland, its firm ally.
“Russia benefits from potential disunity,” Welsh said, “and also from the drain of resources from the EU, as the EU is… supporting alternative routes [para el grano de Ucrania]”.
Tensions between Ukraine and Poland have since eased.
Price drop
Russian wheat exports are reaching record highs. In May, the US Department of Agriculture predicted that Russia would export “a record” 45 million tons of wheat in the 2022-23 season. This coincides with data from S&P Global, which speaks of 46.1 million for that season, a figure that is expected to be exceeded by the amount that will be sent in 2023-24.
However, wheat prices have been falling since the post-invasion rally, hitting their lowest closing level in more than three years late last month (although prices remain higher than in most of the last decade). This means that Russia’s record exports cannot guarantee record income.
SovEcon’s Sizov notes that Moscow has attempted to impose an unofficial floor on wheat export prices. In March, Archyde.com reported, citing two sources, that the Russian government wanted exporters to ensure that prices paid to farmers were high enough to cover average production costs.
But other actors are also beginning to have a downward impact on Russian prices. According to Sizov, a recent tender to sell wheat to Egypt was won by Romania, which offered a price of US$256 per ton, while Russian sellers offered US$270.
Paul Hughes, chief agriculture economist at S&P Global, believes the biggest challenge for Russia will come if sellers from the EU – another major wheat exporter – lower their prices.
“At that point, Russia will have to choose,” he told CNN. “One, keep the floor [del precio de exportación] and cede export quota to the EU or, two, abandon its floor, reduce the price and maintain its export pace,” he said in comments sent by email, calling such a scenario a “moment of reckoning.”
But Ukraine, where about 8% of the agricultural area is out of action because of the war, is already in a bind. S&P Global expects its wheat exports to fall by 3.7 million tonnes to 13.4 million in 2023-24, the lowest in nine years. And a significant reduction in global wheat supplies could still drive up prices, Welsh suggests.
“Ukraine starts harvesting its crops in late summer until autumn and exports its crops in November, December, January, February,” he said. “So if Ukraine continues to have limited access to its ports as its export season ramps up, that’s where you could see the biggest impact on global markets.”
And if wheat prices rise, Russia will be well placed to reap the benefits.
With information from Olesya Dmitracova and Svitlana Vlasova.
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