5 months ago • 2 mins
What’s going on here?
Russia pulled out of the Black Sea grain deal on Monday, jeopardizing the flow of key foodstuffs.
What does this mean?
Last July, right in the middle of the Ukraine conflict, the UN and Turkey managed to hammer out a grain export deal. And that’s been a lifeline ever since, ensuring the safe passage of nearly 33 million tons of crops from Ukraine via the Black Sea – with over half reaching developing nations. But Russia hasn’t been a fan of the deal from the start, arguing that the West’s sanctions are putting a damper on Moscow’s own exports. And now it seems the country’s patience has run out: it formally ended the deal on Monday, saying it will only change its stance if the “relevant agreements are fulfilled”.
Why should I care?
Zooming in: Second time’s unlucky.
This isn’t the first time Russia’s played this card: the country briefly exited the deal in November, only to rejoin under pressure from Turkey. But this time around, Turkey’s pleas might fall on deaf ears – especially after the nation ruffled Russia’s feathers by endorsing Sweden’s NATO membership bid last week. And that could spell trouble: after all, Ukraine’s a major player in the world’s grain and vegetable oil market, and this move threatens a crucial trade route just as the harvest season is about to kick off. And that might reawaken some dormant worries about a hard-hitting global food crisis.
The bigger picture: More pain, no grain.
The price of wheat jumped when the news broke, and for good reason: see, without the Black Sea route, grain has to take a pricier detour. And that extra cost could lead to hard-pressed farmers planting less next season, potentially hitting global food supplies in the long run. And with demand steady and supply dwindling, the world could see prices leap – adding fuel to the food inflation fire.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
/3 • Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.