(TotalConservative.com) – Russia has pulled out of the Black Sea grain deal, a year-old agreement that allowed Ukraine to export its wheat to international markets. Ukraine provides roughly 10% of the world’s grain export, suggesting that without their contribution to global markets, the cost of those goods will jump significantly.
Previously Turkey had encouraged Russia to maintain the deal, but unless a diplomatic solution can be found in short order, the cost of grain-based goods will rise. In 2022, grain shortages caused significant absences of bread and products from shelves. You can see some pictures here.
With the combined impact of shortages in the aftermath of the pandemic and inflationary pressures across the market continuing, any new inflationary pressure is going to have a dramatically enhanced downstream impact. Inflation for basic foodstuffs varies depending on where in the country and what items you look at, but generally, we’re seeing 8-10% year-over-year increases. That’s without the impact of Russia pulling out from the deal.
Yahoo News is reporting the worst impact would be for poor countries that depend on UN food programs to keep their population adequately fed. The UN World Food Program, for instance, purchased 80% of its grain from Ukraine. That, in turn, is donated to impoverished countries like Afghanistan, Yemen, and smaller places in East Africa. Without access to that grain at a reasonable price, poor people in those countries will suffer or starve.
Russian authorities are referencing a Ukrainian attack on a bridge for the cessation of the deal, but this isn’t the first time they pulled out. In August 2022, Russia similarly withdrew from the arrangement and Turkey’s president intervened to negotiate a settlement after just two days.
Is a historical repeat in the cards? If so, it would help abate some inflationary pressures, but if not, the cost of grain-based goods across the board will rise with the most devastating impacts in poor nations that depend on food donations and other support to feed their people.
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