- Food inflation has mostly been brought on by Russia, top economist Paul Krugman said.
- Russia's invasion of Ukraine has disrupted agriculture and raised fertilizer and natural gas prices.
Soaring food prices have largely been driven by Russia's invasion of Ukraine, not by anything that happened in the US, according to top economist Paul Krugman.
The Nobel laureate pointed to accelerating food prices over the past year, with the Food and Agriculture Organization's Food Price Index rising to 123.9 in July. That's 12% cheaper than what food prices were last year, but still well-above prices in the summer of 2020, when the index dipped below 100.
Observers have argued that spiraling food prices are the result of out-of-control spending under the Biden administration, and "greedflation," a phenomenon where businesses hike prices in a bid to reap even higher profits in times of widespread inflation.
But the primary driver of "foodflation" exists outside of the US -- and lies largely in the hands of Russia, Krugman argues. That's because Russia's invasion of Ukraine has disrupted agricultural production across Ukraine, Russia, and Kazakhstan, which has affected the available supply of food and pushed up prices. That's raised the risk of a full-blown food crisis unfolding, experts say, with protests and breaking out around the globe as food grows scarce.
Russia has even taken measures to attack key export hubs for food in Ukraine, and sent wheat prices soaring in July after backing out of the Black Sea export agreement and bombing the port of Odesa.
Russia's invasion of Ukraine also spiked fertilizer prices, as the nation is one of the world's largest exporter of fertilizer. Russian natural gas, which is used to produce fertilizer in Europe, also got more expensive as Putin slashed key pipeline flows to the continent.
Those factors have worked to stoke food prices, which was been worsened by agricultural disruptions stemming from climate change and extreme weather events, Krugman said. Still, Russia's impact is still "at the top of the list" for culprits driving food inflation.
"Russia may be the only government able to have much impact on world food inflation; we would definitely see some relief if Vladimir Putin called this invasion off (which he won't)," he added.
But inflation overall appears to be cooling as high interest rates in the US rein in the economy. Headline prices accelerated just 3% year-per-year in June, well-below the 9.1% recorded in June 2022.
Markets are now waiting for the July Consumer Price Index report to be released on Thursday, which should give more direction on how inflation is responding to tighter financial conditions. Headline prices are expected to accelerate 3.42% year-per-year, slightly higher than June's inflation reading, according to the Cleveland Fed.