As Russia has halted the Black Sea grain deal, the prices of some commodities, including wheat, peas and edible oil, as well as food grain may shoot up in the domestic market.
It may further push up the prices of essential commodities and result in a low supply of food grain, exacerbating the declining trend of commodity imports into Bangladesh, value-chain experts and importers warn.
Importers said Bangladesh directly imports wheat and pulses from Russia and Ukraine. If import through Black Sea is stopped due to a lack of an agreement, the local supply might be disrupted again and the country's markets may become volatile, they added.
Apart from this, various countries import sunflower oil, iron and vegetable seeds from Ukraine. As a result, if major source of import of these products is stopped, it will affect the whole world market. This will also push up the prices of soybean oil and lentil etc. For example, if the import of sunflower oil is stopped, its demand will increase in other countries, including India. This will also drive up the price of soybean oil again.
A UN-Turkey-brokered agreement between Kiev and Moscow for safe transportation of grains from Ukrainian ports on Black Sea has ended, Russian media reported on Monday, quoting Kremlin spokesman Dmitry Peskov.
As Russia showed no interest in renewing the agreement, he said, the agreement was automatically 'terminated'. Moscow would return to the deal if conditions were met, he added.
Russia and Ukraine signed the 'Black Sea Grain Agreement' brokered by the United Nations and Turkey in July last year. The contract was renewed for 120 days in November. In March, Russia recommended renewing the grain export agreement for 60 days instead of 120 days. The contract was due to expire on Monday.
UN Secretary General Antonio Guterres also wrote to Russian President Vladimir Putin to renew the agreement. But Russia showed no interest in renewing the agreement.
Different countries in the world, including Bangladesh, import 7-8 types of products from Russia and Ukraine. The products are flour wheat, mustard seeds, peas, sunflower oil, rods, sponge iron, fertilizers, newsprint etc.
According to the data of the National Board of Revenue (NBR), 2.2 million tonnes of goods were imported from the two countries in the fiscal year 2021-22. Bangladesh imports more than 50 per cent of wheat from Ukraine.
Russia is the second largest source of pea export after Canada. Ukraine was in the fourth position. Sunflower oil was mostly imported from Russia. Ukraine was in fifth position.
If the agreement is not renewed, traders will have to find alternative markets and products to import and meet the demand for these products.
Redwanur Rahman, executive director of Bashundhara Foods and Beverages, one of the largest importers of consumer goods, said after the start of Russia-Ukraine war, import of wheat and other products from Russia and Ukraine remained suspended. “This has already had major impact on the commodity markets in the world as well as Bangladesh. This increases the prices of many products, including wheat, edible oil, and lentil. The wheat demand of the country was met by imports from India.”
After the Black sea grain agreement brokered by Turkey, imports started again and supply activities were also normal.
“If imports stop again due to lack of black sea agreement, the market of seven to eight types of products, especially wheat and edible oil, will be more volatile, because maximum wheat for making flour and sunflower oil is imported from Ukraine,” he Rahman said.
According to various companies, the country has the demand for 30-60 thousand tonnes of wheat per month. The buffer stock will last for 3-4 months.
Value-chain experts warn that Russia's discontinuation of the Black Sea grain initiative may further fuel the prices of essentials and result in a low supply of the food grain, exacerbating the declining trend of wheat imports into Bangladesh.
Shafiul Ather Taslim, director of TK Group, said if the Black Sea deal is not renewed, it is certain that there will be a shortage of supply of products in the market which are directly imported into the country. “Besides, problems may arise in the market of sunflower oil and other products due to supply disruption in the international market.”
For example, he said, those who import sunflower oil will import soybean oil as an alternative which will create additional demand in the oil market. Countries like Bangladesh that import soybean oil will face problems, he added.
After Russian invasion of Ukraine in February 2022, wheat prices are on the rise, reaching a decade high in May this year at over $400 per tonne (excluding shipping charges), as reported by global commodity web portals. Now it is being sold at $350-360 per tonne.
