Why renewal of Russia-Ukraine grain deal is vital for Bangladesh

The Black Sea Grain Deal, facilitated by the United Nations and Turkey, facilitated the export of grain from Ukraine. This made Ukraine a significant wheat source for Bangladesh after India imposed a ban on its shipment. The deal was extended in November 2022 and March 2023. However, on July 17, 2023, Russia formally withdrew from the agreement. President Putin’s spokesperson, Peskov, stated that Russia would rejoin the deal once the relevant agreements regarding payments, insurance, and shipping of Russian agricultural exports are fulfilled. Russia’s withdrawal from the deal poses a potential risk to wheat exports from Ukraine, impacting countries like Bangladesh. Let’s explore the importance of the renewal of the Russia-Ukraine grain deal for Bangladesh.

Bangladesh’s wheat production and import

Bangladesh’s annual requirement for wheat is 75 lakh tonnes, but the country can only produce around 11 lakh tonnes. As a result, the rest of the requirement has to be imported.

In the fiscal year 2021-22, Bangladesh imported 40.12 lakh tonnes of wheat. From July 1 to February 15 of the fiscal year 2022-23, the country imported a total of 17.57 lakh tonnes of wheat.

India’s Ban on Wheat Shipment 

India banned the export of all wheat, including high-protein durum and normal soft bread varieties with effect from May 13, 2022. A significant decrease in wheat production caused by a severe heat wave in March-April and a surge in domestic food prices led to the decision to ban wheat export.

India is preferred to be a cheaper and more convenient source of wheat due to the shorter shipment period, low freight cost, and geographic proximity.

The decision prompted Bangladesh to look for alternative sources since India was the primary source of wheat for Bangladesh, accounting for 67% of the country’s total wheat import in the fiscal year 2021-22.

Renewal of sourcing from Russia and Ukraine

Both Russia and Ukraine used to be the key sources of wheat imports for Bangladesh. During the fiscal year 2021, for example, around 23 lakh tonnes of wheat were procured by Bangladesh from Ukraine, representing slightly over 17% of its total imports. Additionally, almost 21% of wheat was sourced from Russia, while 24% came from India.

However, the outbreak of the Russia-Ukraine war in February 2022 seriously disrupted the export of wheat from those countries. The export ban by India exacerbated the situation resulting in sharp spikes in the prices of flour and baked food in Bangladesh’s local market.

Thanks to a Russia-Ukraine grain deal, Bangladesh was able to import wheat from Russia and Ukraine, which offset the shortfall caused by India’s ban.

The Black Sea Grain Deal, brokered by the United Nations and Turkey in July 2022, allowed grain to be exported from three Ukrainian ports. 

However, importing wheat from Ukraine now takes longer due to several checks on the way. 

Meanwhile, Bangladesh has successfully managed to import wheat from Canada. 

Currently, Russia, Ukraine, and Canada are the three major sources of wheat for Bangladesh.

According to Md Aminul Islam, managing director of Nabil Group, one of the largest importers of wheat, the overall import from these three countries would be around 14 lakh tonnes so far this fiscal year, reported Bangladesh’s leading English newspaper The Daily Star.

The Importance of the renewal of Russia-Ukraine Grain Deal

The main objective of the Black Sea Grain Initiative was to ease global food shortages, with a focus on the world’s poorest nations, like Somalia and Eritrea, which depend heavily on wheat imports from Russia and Ukraine.

 It is vital that negotiations for the renewal of the deal are started again, as a grain deal will help ensure a steady supply of wheat to the world’s poorest countries.

In conversation with The Daily Star, Taslim Shahriar, senior assistant general manager of the Meghna Group of Industries, stressed the importance of the renewal of the Russia-Ukraine Grain Deal as it is crucial for a smooth supply of wheat to Bangladesh and keep the price at a tolerable level. 

As expected, the global wheat prices surged immediately after Russia’s announcement of withdrawing from the deal. The most active contract on the Chicago Board of Trade rose by 6.7 percent to $6.89 per bushel.

In the July-August period of 2022, the price of wheat flour in Bangladesh reached a record high of Tk 75-85 per kg. However, the price of wheat flour had declined since the grain deal was established.