Threats to the Black Sea Grain Initiative could drive up prices - a chart that reads "The grain deal helped bring wheat prices back to pre-invasion levels"

MNCs should be attuned to the risk of higher food cost pressures and inflation

In the run-up to the renewal date for the deal, further threats from Russian President Vladimir Putin could lead to higher prices for grains and vegetable oils, including wheat, corn, soybeans, sunflower, and rapeseed products. A full withdrawal from the deal would send prices soaring. Tighter grain markets would increase the risk of export quotas from major food exporters, as seen earlier this year in the case of Indonesia’s export ban on palm oil. MNCs that rely on grains and vegetable oils for inputs should also plan for additional cost pressures, and keep a close eye on developments around the deal.

Higher grain prices would also translate to stronger inflationary pressures, particularly in lower-income countries where food represents a larger share of the consumer basket. MNCs should develop contingency plans for such an outcome, which would see heightened price sensitivity from consumers and an increased risk of social unrest.   


  • In July, Ukraine and Russia signed a deal allowing for the resumption of grain exports from Ukraine.
  • The deal, brokered by Turkey and the UN, carves out a transit route in the Black Sea that ensures the safe passage of ships out of Ukrainian ports, notably Odessa.
  • The initiative has proved successful; so far, over 200 ships carrying 5 million tonnes of grain have left Ukraine.
  • The Black Sea Grain Initiative has brought relief to grain prices. Wheat prices have fallen back down to pre-invasion levels. Soybean prices are down nearly 20% from their post-invasion peak.
  • The agreement is in force until mid-November and is renewable if all parties agree.

Our View

The Black Sea Grain Initiative, the only real diplomatic breakthrough since the start of the war, allows Ukraine to earn much-needed foreign currency, as well as to sell its grains and free up storage for the upcoming harvest. Meanwhile, the deal helps Russia placate countries in the Middle East and Africa who have seen the price of food staples soar since the invasion, and on whom Russia relies for diplomatic support. The deal also includes clauses that ease sanctions on Russian fertilizer exports and allow the country to ensure its food security through seed imports.

However, Putin has threatened to withdraw from the deal and called it a “scam,” arguing that most of the grain is going to high-income countries in the EU rather than low-income ones who need it most. In reality, threats of withdrawal could be another way for Putin to exert pressure on his enemies after failures on the battlefield and in the energy realm. As a base case, we do not expect Putin to fully withdraw from the deal, for which he would face accusations of “exporting hunger.” However, it is likely that he will try to renegotiate the deal in November, possibly to include earmarking clauses favoring low-income countries.

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