The risk of a fresh uptick in global food inflation emerged Monday after President Vladimir V. Putin pulled Russia out of the Black Sea grain deal, sending wheat prices surging and exposing vulnerable countries in Africa and the global south in particular to the prospect of a new round of food insecurity.
Chicago wheat futures, a barometer for global prices, jumped more than 4 percent as the Kremlin’s move once again jeopardized a key trade route to global markets for grain from Ukraine, one of the world’s major bread baskets.
The move appears to be part of a broader effort by Mr. Putin to reassert an aura of unassailable authority after a failed mutiny by the Wagner Group, said Timothy Ash, a senior sovereign strategist at BlueBay Asset Management in London and an expert on Russia and Ukraine. “It will hurt specific countries dependent on these exports,” Mr. Ash said. But beyond that, “it shows how weak Putin is after the Wagner coup: He is now desperate to take any bit of leverage he can.”
The Black Sea Grain Initiative was struck a year ago to alleviate a global food crisis after Russia’s invasion of Ukraine, when Russia blocked ships from carrying the country’s grain out of its ports on the Black Sea. Those blockages swiftly sent grain prices soaring to record highs.
Since the deal, food prices have dropped over 23 percent from their peak in March 2022, according to the United Nations Food and Agriculture Organization’s Food Price Index. The accord has allowed over 35 million tons of vital food commodities to be exported from Ukrainian ports on the Black Sea to 45 countries on three continents, the United Nations said.
With the Black Sea ports closed again, Ukraine may have to redouble its use of alternate routes to get the grain out, including exporting via the Danube River, and by truck and train overland — journeys that take vastly longer than putting the commodities on ships.
Some factors may prevent food prices from spiking to the staggering levels seen just after Russia invaded Ukraine. For one thing, the global commodity price outlook is weaker than a year ago because of a faltering economic recovery in China, while a global cost-of-living crisis — fueled in part by surging food and fuel costs in the wake of Russia’s aggression — has been eroding demand more generally, Mr. Ash said.
Supply chain stresses are also easing, and manufacturing and production costs have cooled, according to an analysis by Oxford Economics. Even so, while food prices have been drifting downward, they are likely to remain high compared with to prewar levels, the think tank said.
Arlan Suderman, chief commodities economist at the financial services firm StoneX, said that as far as global food supplies are concerned, Russia was still dumping cheap wheat on the market “so we are not running out of wheat right now.”
The day before Mr. Putin pulled out of the grain accord, he sent a separate warning shot to Europe by signing a surprise order for the temporary seizure of the Russian operations of two major European companies.
Danone, the global dairy producer based in France, said in a statement that its Russian assets had been placed in temporary administration by the Russian authorities, and that it was “investigating the situation.” The company added that it was “preparing to take all necessary measures to protect its rights as shareholder of Danone Russia, and the continuity of the operations of the business in the interest of all stakeholders, in particular its employees.”
The Danish brewer Carlsberg, the world’s third largest beer maker, said that it learned on Sunday that its Baltika Breweries in Russia had been transferred to the temporary management of the Russian Federal Agency for State Property Management. Carlsberg announced more than a year ago that it was withdrawing from Russia. Last month, it said it would invest $40 million in its Ukraine factories, and that it had found a buyer for the Russian operation, which employs 8,400 workers.
“Following the presidential decree, the prospects for this sale process are now highly uncertain,” Carlsberg said in a statement on Sunday.
Patricia Cohen contributed reporting.
Liz Alderman is the chief European business correspondent, writing about economic, social and policy developments around Europe. She was previously an assistant editor in New York, and the former business editor of The International Herald Tribune. More about Liz Alderman
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