BRICS+ Initiates Significant Shift in Global Grain Trade Dynamics

Interest in the ongoing conflict in Ukraine has predominantly centered on the military and political aspects, prompting discussions about broader implications, one of which is the emergence of the BRICS+ organization. BRICS initially referred to an informal grouping of nations that were experiencing significant growth but were not aligned with the traditional 'western' powers such as the United States and Europe. The founding members were Brazil, Russia, India, and China, with South Africa joining later. Over time, this informal arrangement has evolved into a formal trading bloc, which recently expanded to include Saudi Arabia, Egypt, the United Arab Emirates (UAE), and Ethiopia, hence the addition of the '+' sign to the acronym. Russia has been a staunch advocate for the organization and currently holds the presidency for the year 2024.

At the forefront of BRICS+'s agenda is the establishment of a grain trading organization aimed at rivaling the Chicago-based system that has historically served as the world's primary exchange since World War II. This endeavor is significant as these countries collectively account for 44% of global grain production and consumption. Consequently, western dominance over grain prices and distribution may diminish. There are three primary motivations driving this shift. Firstly, there is an altruistic aim to make grain more accessible to developing nations facing nutritional challenges, with some arguing that finance-driven markets exclude poorer countries from full participation.

Secondly, BRICS+ now possesses sufficient economic clout to challenge the perceived 'American imperialism'. With a combined gross domestic product (GDP) surpassing that of the G7, which includes major grain-producing nations like the United States and Canada, BRICS+ asserts itself as a viable alternative. Thirdly, there is a desire to reduce reliance on the US dollar as the dominant global trading currency. This transition is already evident in oil transactions among BRICS+ members, which are increasingly conducted in currencies like the Chinese yuan, Russian ruble, and Indian rupee. Now, the focus has shifted to grain, signaling a broader trend towards de-westernization of commodities, which will impact pricing and availability globally.

For the western food and milling industry, this presents a significant concern as traditional factors influencing grain prices may no longer hold sway, or they may be overridden by the priorities of BRICS+ member states. This uncertainty complicates price forecasting and futures trading. While trade between the west and BRICS+ will continue, the policies and priorities of non-western governments will exert greater influence on price and availability than before. For instance, if India experiences a poor harvest, BRICS+ may prioritize shipping large quantities of grain to alleviate shortages, potentially affecting grain availability in countries like Ireland. In such scenarios, the EU and individual governments may have limited influence over the outcome.

While the tillage sector may benefit from higher prices, these gains may be tempered by market dynamics and substitution in the livestock sector. Ultimately, the evolving landscape of global grain trading underscores the need for stakeholders to adapt to changing realities and navigate the uncertainties posed by the emergence of BRICS+ as a formidable player in the agricultural commodities market.