Russia exits UN-brokered deal for export of Ukrainian grain - What does this mean for global food economy?

Efforts to avoid a global food crisis amid the Ukraine-Russia war hit a stumbling block on Monday as Moscow backed out of a UN-brokered deal. Kremlin spokesman Dmitry Peskov told reporters on a conference call that the Black Sea agreements which allowed export of Ukrainian grain had ‘ceased to be valid today’. The development came mere hours after it accused Ukraine attacking the Crimean Bridge. Officials however insisted that their decision had nothing to do with the bridge attack which killed two people and wounded their daughter.

“The Black Sea agreements ceased to be valid today. Unfortunately, the part of these Black Sea agreements concerning Russia has not been implemented so far, so its effect is terminated,” Peskov said. 

The now expired deal was brokered by the United Nations and Turkey last July and allowed the safe export of Ukrainian grain blocked by the conflict. It had been extended several times even as Russia insisted for several months that conditions for its continuation had not been fulfilled. 

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The Black Sea Grain Initiative has reportedly allowed the export of 36.2 million tons of food from Ukraine since August last year. More than half of this was sent to developing countries - including those getting relief from the World Food Program. Kyiv has often been been dubbed the ‘breadbasket of the world’ and the suspension is likely to prompt a spike in food prices - at least in the short run. Interrupted shipments in the early days of the war for instance had exacerbated a global food crisis and sent prices for grain soaring worldwide.

According to an AP report citing the International Rescue Committee, the grain deal is a “lifeline for the 79 countries and 349 million people on the frontlines of food insecurity”. An as climate change wreaks havoc across continents (and destroys crops) many countries have become greatly dependent on imported food. 

“You will have a new spike for sure (if the deal isn’t renewed). The duration of that spike will depend a lot on how markets will respond,” AP had quoted UN Food and Agriculture Organization chief economist Maximo Torero as saying.

Some analysts however don't foresee a lasting rise in the cost of global food commodities like wheat because there's enough grain in the world to go around.

(With inputs from agencies)