Launching "silent weapon", Russia receives big reward, Ukraine falls into difficult situation?

In April 2023, former Russian President Dmitry Medvedev, now Deputy Chairman of the Russian Security Council, said on his Telegram channel: “Food is our silent weapon.”

Farmers harvest wheat in Russia. (Source: AFP)

Despite Moscow's claims that Western sanctions have "choked" food exports, Russia's share of the global wheat market has increased significantly since it launched a special military operation in Ukraine in February 2022.

Wheat is soft power

Russia is expected to have a record-breaking wheat harvest this year, the second year in a row the country has achieved such success.

Russia will export 47.2 million tonnes of wheat in the current crop year, which begins in the summer, according to data from S&P Global. That would account for 22.5% of global wheat exports, a market-leading share. Two years ago, Russia exported 32.6 million tonnes, or 16% of the market.

During the same period, Ukraine's share of global wheat exports fell from 9% to an expected level of just over 6%.

Bloomberg news agency noted that the above figures continue to strengthen Russia's position in the global market as the number one exporter.

At the BRICS summit in late August, Russian President Vladimir Putin said: “Our country is capable of replacing Ukrainian grain, both in terms of trade and in free aid to poor countries .”

Caitlin Welsh, director of the global water and food security program at the Center for Strategic and International Studies, said: "Russia is aiming to 'wipe out' Ukraine's agricultural sector.

Agriculture is vital to Ukraine's economy. Before the military campaign, the sector accounted for 11% of President Volodymyr Zelensky's country's GDP. This would be a huge bonus for Moscow."

According to experts, the commitment to “free grain aid to poor countries” emphasized by President Putin reflects Moscow’s desire to continue building alliances with developing countries – especially with African nations.

Those comments came just weeks after Russia withdrew from the Black Sea Grain Initiative (July 17) – which was intended to ensure the safe passage of ships carrying grain from Ukrainian ports.

Moscow's withdrawal from the grain deal is a major new test for Europe's united "front" in supporting Kiev, some analysts say.

In May, the European Commission (EC) banned imports of Ukrainian wheat, corn, rapeseed and sunflower seeds to Bulgaria, Hungary, Poland, Slovakia and Romania. These countries said the influx of cheap, duty-free grain from Ukraine was driving down the prices of domestically produced products, hurting local farmers and the economy.

Farmers in five countries neighboring Ukraine have also repeatedly protested against the surplus of grain products in the domestic market, affecting agricultural prices and pushing people and businesses to the brink of bankruptcy.

The ban expired on September 15 and the EC decided to lift the temporary restrictions on grain from Ukraine. However, Poland, Hungary and Slovakia still decided to impose unilateral restrictions on grain imports from the country.

When the EU refused to extend the restrictions, some countries unilaterally imposed import bans, which caused friction between Kiev and its staunch ally - Poland.

“Russia benefits from the potential disunity of EU countries,” said Caitlin Welsh.

Tensions between Ukraine and Poland have eased for now. The two sides have agreed to speed up the transit of Kiev's grain to third countries.

A combine harvester harvests wheat in the Novosibirsk region of Siberia in September. (Source: AFP)

Wheat prices fall thanks to "full grain granary"

Russia's wheat exports are at an all-time high. In May, the US Department of Agriculture predicted that Moscow would export a record 46 million tonnes of wheat in the 2022-23 crop year.

Wheat prices spiked after the start of the special military operation and then fell, reaching their lowest level in more than three years late last month. Experts say record wheat exports from Russia helped push prices down.

Russia’s “full grain bowl” is a blessing for consumers hit by the cost-of-living crisis, Bloomberg reports. Record shipments have sent prices down to their lowest level in nearly three years.

This also means that record exports may not guarantee that Russia will maintain record revenues.

Andrey Sizov, who runs SovEcon, a consultancy for the wheat and corn industry, noted that Moscow has tried to enforce an unofficial floor price for wheat exports. Reuters cited two sources as saying the Russian government wants exporters to ensure that prices paid to farmers are high enough to cover average production costs.

But other players are entering the market and competing with Russia. A closely watched recent tender to sell wheat to Egypt was won by Romania, which offered $256 a tonne, while Russian sellers offered $270 a tonne, according to Mr Sizov.

Paul Hughes, agricultural economist at S&P Global, believes Russia's biggest challenge will come if sellers in the EU - another major wheat exporter - lower prices.

"At that time, Russia will have a choice. One is to maintain the floor price for exports and give up its export market share to the EU. The other is to give up the floor price, reduce prices and maintain the export speed," he affirmed.

Ukraine is undeniably in a difficult position right now. S&P Global expects its wheat exports to fall by 3.7 million tonnes to 13.4 million tonnes in 2023-24, a nine-year low.

"With global wheat supplies significantly reduced, prices can still be raised. And if wheat prices increase, Russia will be in a position to benefit," commented Ms. Welsh.

Source: https://baoquocte.vn/tung-vu-khi-tham-lang-nga-nhan-phan-thuong-lon-ukraine-roi-vao-tinh-the-kho-khan-245366.html