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Turkey may emerge as gateway for Agri exports, primarily wheat in Black Sea region

"Turkey may emerge as gateway for Agri exports, primarily wheat in Black Sea region"
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Turkey may emerge as the gateway for Agri exports, primarily wheat in the Black Sea region.

Turkey may emerge as the gateway for agricultural exports, primarily wheat, that have been stalled in the Black Sea region, as Russian President Vladimir Putin has ‘in principle’ agreed to allow the Recep Tayyip Erdogan government to move shipments from the Odesa Sea Port, which was taken over by the Kremlin during the Ukraine war.

In exchange for Ankara clearing sea mines in the Black Sea region, Putin agreed to allow Turkey to clear the shipments. According to preliminary discussions with the US, the Erdogan government plans to build a naval corridor and escort wheat-laden ships to the Bosphorus Strait, an international waterway in northwestern Turkey.

This will establish a potential sea corridor for agricultural exports, particularly from Ukraine, with Russia ensuring free movement and Turkey acting as a coordinator. Also Read | After the prohibition on wheat exports, the harvest is bitter for Indian farmers.

More discussions

‘On Monday, an in-principle clearance was issued (May 30). Anything is possible until the mines are cleared and the ships begin to depart. However, Russia will most likely take advantage of this opportunity to export wheat and fertiliser,’ said S Chandrasekaran, a trade analyst who is aware of the developments.

Putin and Erdogan agreed that the issue would be discussed further by Russian Foreign Minister Sergey Lavrov next week. According to Turkish Foreign Minister Mevlut Cavusoglu, Lavrov will arrive in Ankara on June 8 with a defence delegation to discuss the safe shipment issue.

Turkey entered the picture after Russia declined offers from the United Kingdom and Italy to clear sea mines in the Black Sea. ‘There will be a great deal of distrust on both sides regarding the demining operations.’ Ukraine may suspect a Russian attack, while the Kremlin may be concerned about the shipment of weapons to Kiev. ‘It will take at least a month before the protocol can be written down,’ he said.

However, if this occurs, Turkey traders will take advantage of the situation and purchase these products. As a result, they may become suppliers for other countries, according to the analyst.

Ukraine’s Issues

The development comes at a time when Ukraine is having difficulty transporting wheat to Europe and other countries via railway rakes through Poland, Hungary, Romania, and Slovakia. Essentially, Turkey will facilitate the safe export of agricultural products from Ukraine, primarily wheat and corn (maize). ‘The issue is that the railway gauges in Ukraine and Europe are incompatible. The wheat must be unloaded from one waggon and loaded onto another, or it must be shipped by container, which must be physically lifted from one train to another,’ he explained.

According to the analyst, 467 waggons were handled in the four European nations, and the incompatibility caused a delay in shipments because they had to physically handle them. ‘A Ukrainian railway rake can only transport 1,900 tonnes, whereas an Indian railway rake can transport 2,400 tonnes,’ he explained.

Ukraine, on the other hand, is encountering difficulties in transporting wheat by barge through the Danube, with delays ranging from four to ten days at the borders. Trucks are currently backed up for more than 20 kilometres because only seven barges are cleared each day on the Danube.

Also Read | Russia-Ukraine conflict: India’s wheat exports expected to exceed 10mt this fiscal year – USDA.

Truckers’ problems

‘There are logistical issues. The volume of Ukraine wheat, in particular, will not increase unless inspection capacity is increased and technical snags are resolved,’ Chandrasekaran said.

Other issues arise when transporting wheat by road. Private trucks are hesitant to transport agricultural cargo because insurance companies do not cover the risk of Russian bombing or strafing. ‘As a result, a convoy of six barges moves down the river, totaling 18,000 tonnes,’ he explained.

Russia’s decision to allow the shipments safe passage is seen as an attempt to blame Ukraine, and it comes at a time when the United Nations World Food Program is fighting to feed millions of vulnerable people.

According to Chandrasekaran, Turkey’s offer is supported by the 1936 Montreux Convention, which established Turkey as the arbiter for entry and exit from the Black Sea. ‘Because the US is supporting the agreement, NATO will not impose sanctions. Anyone involved in the removal of sea mines must spend at least a fortnight,’ he said.

Rejection of Indian wheat

According to the analyst, this could have also been a reason for Turkey to reject an Indian Durum wheat shipment. The 56,877-tonne shipment was rejected due to the presence of Rubella disease on the wheat.

However, both the Indian seller, ITC Ltd, and the buyer, a Dutch trading house, have received payments from the Turkish firm that purchased the consignment from them, indicating that there may be more to the story than meets the eye.

Also Read | India’s wheat shipment that was rejected by Turkey was sold via Swiss trading house.

The Russian-Turkish talks are critical for keeping inflation under control, particularly in food commodities such as wheat, corn, and oilseeds. Since the Russia-Ukraine conflict erupted on February 24, prices for these commodities have skyrocketed, sending inflation soaring.

On the Chicago Board of Trade, benchmark wheat prices have dropped by more than 7% to a four-week low of $10.56 per bushel ($388 per tonne) (CBOT). CBOT benchmark corn prices have fallen by about 5% to $7.29 per bushel ($287 per tonne).

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