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Ray of hope as Black Sea grain corridor reopens

ECONOMIC DAILY | Updated: 2022-08-12 07:13

The Sierra Leone-flagged cargo ship, Razoni carrying Ukrainian grain leaves the port, in Odesa, Ukraine, Aug 1, 2022, in this screen grab taken from a handout video. [Photo/Agencies]

A cargo ship loaded with Ukrainian grain left the Black Sea port of Odessa and headed for the Lebanese port of Tripoli on Aug 1, marking the resumption of the Black Sea "grain corridor" that had been suspended ever since the Russia-Ukraine conflict broke out.

The flow of more than 20 million metric tons of grain locked in the Black Sea port to the international market will to some extent ease global food supply tensions.

The Black Sea "grain corridor "is the main artery for grain exports from Russia and Ukraine, which together account for more than 30 percent of global grain exports. The Russia-Ukraine conflict has disrupted almost all Black Sea grain export channels, causing a lot of Ukraine's food to be stranded at ports while blocking Russian food and fertilizer exports.

As the world's food supply and demand conditions have not improved, the impact of the conflict on the global food industry and supply chains has further exacerbated the global food crisis, which is a result of the combined effects of the COVID-19 pandemic, extreme weather events, global excess liquidity and the Russia-Ukraine conflict. Efforts are being made to ease the global food supply and demand problem. Apart from the lifting of the blockade on food exports from the Black Sea port, China and Russia have increased their wheat supply, Brazil and Argentina have increased their seasonal corn supply, Indonesia has canceled an export tax on palm oil products till August 31, and Myanmar has increased exports of rice and broken rice.

With the gradual improvement of the food supply and demand environment, coupled with liquidity tightening as a result of monetary tightening policies in Europe, the United States and other developed economies, speculative capital has quickly withdrawn from the food market. As a result, global food prices have fallen sharply.

However, some factors continue to affect the stability of the global food industry and supply chains, and any emergency could again trigger huge fluctuations in global food prices.

China's grain prices have generally remained stable because China attaches importance to grain production and food security.

This year, China has seen a big increase in summer grain production, and a bumper autumn grain harvest can also be expected. Moreover, the "zero tolerance" attitude China always adopts toward illegal activities such as grain price speculation has also ensured that the domestic grain market remains stable.

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