Bad news for wheat market as Russia pulls out of grain deal

Bangladesh's wheat market may see fresh volatility after Russia pulled out of a United Nations and Turkey-brokered deal that could turn the global grain market unstable, importers warn.

Importers called the development a matter of concern for Bangladesh. Russia and Ukraine meet 40 per cent of the country's wheat demand.

Russia has informed the UN, Turkey and Ukraine that it will not renew the deal, which allowed Ukraine to export grain through the Black Sea.

The deal, which was reached in July and was renewed every two months, aimed to alleviate a global food crisis by allowing Ukrainian grain blocked by the Russia-Ukraine conflict to be exported safely.

The deal expired on Monday.

The latest move comes after Russia had been saying for months that conditions for its extension had not been fulfilled.

"In fact, the Black Sea agreements ceased to be valid today (Monday)," said Kremlin spokesman Dmitry Peskov, according to Reuters.

"Unfortunately, the part of these Black Sea agreements concerning Russia has not been implemented so far, so its effect is terminated."

Due to the suspension of the deal, the price of wheat increased by $10 to $15 per tonne in international markets today, said Md Aminul Islam, managing director of Nabil Group, one of the largest importers of wheat.

"However, due to the quantity of wheat stocks that traders in Bangladesh currently have, the price may not increase until October."

Abul Bashar Chowdhury, chairman of BSM Group, said the market condition will worsen in the coming days.

He said the wheat price currently stands at $240-$270 per tonne, which was $390 to $420 before the deal was struck.

"I think the price will go up again."

The international development seemed to have impacted the local market already. 

Wheat traded at Tk 1,750 to Tk 1,820 per maund at the Khatunganj wholesale market today, which was Tk 1,725 to Tk 1,800 a day earlier.   

Taslim Shahriar, senior assistant general manager at Meghna Group of Industries, one of the biggest commodity importers and processors in Bangladesh, said when significant events occur in the global market, such as the halt of a grain deal or geopolitical tensions, it can have an impact on the market.

"Uncertainty and unexpected developments can bring about fluctuations in supply and demand and overall market dynamics."

He added: "We have seen good trends in the last two months. The price of commodities went down after the grain deal was made."

Bangladesh's wheat imports fell for the third consecutive year in 2022-23, suffered by falling consumption for high prices and banks' sluggishness in opening letters of credit amid the US dollar crisis.

Food ministry data showed wheat arrival declined 3.4 per cent year-on-year to 38.75 lakh tonnes in FY23. It was 40.12 lakh tonnes in the previous year.

The FY23 import of the grain, for which Bangladesh is highly dependent on the global market, was the lowest in eight years.

Anup Kumar Saha, executive director of Akij Insaf Group, said Russia has suspended its participation in the deal at a time when wheat prices had started to decrease at both international and local markets.

"It's a matter of concern for Bangladesh."

In Dhaka, loose flour retailed at Tk 50 to Tk 52 per kg today, down from Tk 52 to Tk 55 a week ago, data from the Trading Corporation of Bangladesh showed.

The price of branded flour was Tk 58 to Tk 60 per kg, which was Tk 60 to Tk 65 a week earlier.  

Bangladesh's annual demand for wheat is 70 lakh to 75 lakh tonnes, 85 per cent of which is met through imports.