The continuation of the grain agreement will have a positive effect on purchase prices in Ukraine

On Saturday, Ukrainian officials announced that the operation of the Black Sea Grain Corridor will be extended for another 120 days, while the UN confirmed the extension of the agreement without specifying the terms, Turkey has not yet provided official comments, and the Russian Federation insists on extending the agreement for only 60 days.

"The Black Sea Grain Initiative, signed on July 22, 2022 in Istanbul to ensure safe shipping for the export of grain and its processing products, has been extended," the UN reports.

At the same time, the Ministry of Foreign Affairs of the Russian Federation said that it had informed all participants of the agreement about its agreement to prolongation for only 60 days. In response, Ukraine stated that this means changing the central principle of the agreement, so all parties would need to conclude a new agreement.

We will remind that the Ukrainian delegation proposed to expand the agreement by including the ports of the Mykolaiv region and increasing the nomenclature of goods exported through the grain corridor, as well as extending it for a year or an indefinite period, increasing the number of inspection groups in Istanbul, and canceling the inspection of ships leaving from ports of Ukraine. However, the Russian Federation refused any changes to the framework agreement, although it is now proposing to reduce the extension period to 60 days instead of the 120 days provided for in the agreement.

According to the agreement, the next term of its validity will be July 17, 2023, which will coincide with the beginning of the new marketing year for the Black Sea region. This will allow traders to plan purchases and shipments from Ukraine, even taking into account inspection delays in Istanbul.

Already on Friday, when the parties almost agreed on the extension of the agreement, traders resumed the purchase of wheat and corn at internal elevators, and formed the purchase prices at the ports, although in the last 2 weeks they almost did not buy grain for delivery to the ports of the Black Sea.

Currently, Ukraine has restored the export of agricultural products, which fell sharply after February 2022, to almost 6 million tons per month, and not only through the deep-water ports of Odesa, Chornomorsk and Pivdenny, but also through the shallow-water ports of the Danube, road and rail crossings on the border with the EU.

The inclusion of Mykolaiv Oblast ports in the agreement could increase Ukraine's export capacity to 8 million tons per month, but market participants did not believe in such a possibility and hoped only for the extension of the corridor for 120 days.

According to the UN, during the operation of the grain corridor, Ukraine exported 25 million tons of agricultural products, the largest buyers of which were China, Spain and Turkey.