Global inflation is finally coming down, but heightened geopolitical tensions could mean that food is about to get a lot more expensive.
Wheat futures soared by nearly 9% on Wednesday and are on track to hit their highest level in three weeks as tensions in Europe rise following Russia's surprise decision to pull out of a crucial deal allowing the export of grain from Ukraine.
Corn futures were also nearly 2% higher on Tuesday as traders feared an impending supply crunch of the staple foods.
Moscow's withdrawal from the wartime deal on Monday threatens to push up food prices for consumers worldwide and could tip millions of people into hunger.
The White House said the deal had been "critical" to bringing down food prices around the globe, which spiked after Russia invaded Ukraine in February last year.
"Russia's decision to suspend participation in the Black Sea Grain Initiative will worsen food insecurity and harm millions of vulnerable people around the world," Adam Hodge, a spokesperson for the US National Security Council, said in a statement.
Tensions between the two countries heightened on Wednesday, limiting the possibility that the deal to export critical commodities across the Black Sea will be restarted.
The Russian Defense Ministry on Wednesday claimed that its overnight attacks on Odesa, in southern Ukraine, targeted military and fuel infrastructure.
Ukrainian President Volodymyr Zelensky said Wednesday that Russia "deliberately targeted the grain deal infrastructure." Russia's attack damaged an unspecified "industrial facility" as well as "a grain and oil terminal" at Odesa's port, the head of Odesa's regional military administration said.
Wheat prices are still down more than 50% from their all-time high in March 2022.
The Black Sea deal — originally brokered by Turkey and the United Nations a year ago — has ensured the safe passage of ships carrying grain from Ukrainian ports. The agreement was set to expire at 5 p.m. ET Monday (midnight local time in Istanbul, Kyiv and Moscow).
So far, the deal has allowed for the export of almost 33 million metric tons of food through Ukrainian ports, according to UN data.
The deal had been renewed three times, but Russia has repeatedly threatened to pull out, arguing that it has been hampered in exporting its own products.
Over the weekend, Russian President Vladimir Putin indicated that he would not renew the pact, saying that its main purpose — to supply grain to countries in need — had "not been realized."
The collapse of the deal is likely to have repercussions far beyond the region.
Before the war, Ukraine was the fifth-largest wheat exporter globally, accounting for 10% of exports, according to the Organization for Economic Co-operation and Development.
— CNN's Katharina Krebs contributed to this report.
