Economic impacts of the Black Sea Grain Initiative

Abstract

In this research, we use econometric analysis to estimate the impacts of the Black Sea Grain Initiative on international wheat and corn prices. Using these results, we assess the economic value of the treaty to the global food system, as well as the regional distribution of the associated welfare savings. We find that the Russian Invasion created economic costs of approximately $116.05 billion in the global wheat and corn markets. In the international wheat market, the Black Sea Grain Initiative reduced prices by 7.9%, offsetting approximately $21.48 billion of these costs. The largest winners from the Initiative outside Ukraine are primarily in the developing world, particularly in the Middle East and North Africa. We do not observe any economically meaningful impacts of the Initiative in the international corn market.

Short‐term market impact of Black Sea Grain Initiative on four grain markets

“…To our knowledge, this is the first research to simultaneously estimate the abnormal returns for four agricultural commodities around the beginning of the Ukrainian war and for six different stages of the Black Sea Grain Initiative Agreement. The present study differs from previous studies in several ways: (i) extends the empirical study to the various stages of the Black Sea Grain Initiative Agreement-signing of the agreement; first ship loaded with Ukrainian grain; first, second and third extension of the agreement and the date of nonrenewal of the agreement; (ii) instead of estimating the impact of these events on agricultural commodity prices (e.g., Poursina et al, 2023), as in the study by Umar et al (2022), I estimate the impact on abnormal returns in four agricultural commodities as a result of the outbreak of war and the various stages of the Black Sea Grain Initiative Agreement.…”

“…Rising commodity prices mean rising food insecurity (e.g., Mottaleb et al, 2022; von Cramon‐Taubadel, 2022). With static or very marginal increases in income, this means a high loss of purchasing power, especially in developing countries where poor households spend a large proportion of their incomes on food (e.g., Poursina et al, 2023).…”

“…Poursina et al (2023) highlight that Russian invasion of Ukraine was catastrophic for global food security. Wheat consumption is responsible for 20% of global caloric intake.…”

“…The expected increase in prices resulting from the invasion increased world hunger. In turn, the expected economically meaningful global price impacts resulting from the Black Sea Grain Initiative likely translate into reduced hunger for hundreds of thousands of households in developing world (e.g., Mottaleb et al, 2022; Poursina et al, 2023; von Cramon‐Taubadel, 2022).…”

Compensating for the Indirect Effects of the Russian Invasion of Ukraine – Varied approaches from Bulgaria, Poland and Romania

“…The grain crisis timeline is presented in Figure 2. While other impacts of the invasion on agricultural markets like the Black Sea Grain Initiative have been covered by research (Goyal and Steinbach, 2023;Poursina et al, 2023), our contribution aims to describe the national implementations of the EU emergency actions.…”