India bans wheat exports after supply shortage

Placeholder while article actions are loading

After Russia invaded Ukraine – two countries that together accounted for nearly a third of the world’s wheat supply – and sent food prices to record highs, India had to step in to fill the void. Not anymore.

The world’s second-largest wheat producer on Friday banned grain exports over its own food security concerns, potentially exacerbating the surge in global food prices that affects billions of people and threatens food security around the world.

In a Commerce ministry order, Indian officials said they made the decision after considering India’s own needs and those of neighboring countries. India’s food security was “at risk” from rising international prices, the ministry said.

The announcement marked an abrupt reversal, weeks after Indian officials and international analysts discussed the possibility that India could significantly ramp up its exports to close the gap left in part by the war in Ukraine. International food prices have soared to record highs in recent months, putting pressure on billions of people, especially the world’s poorest, UN officials warned.

India tries to adapt to extreme heat, but pays a high price

But a record-breaking heat wave this spring – March was India’s hottest month on record – damaged Indian crops and in some cases cut wheat production by as much as a quarter. As traders rushed to buy food to sell in the international market, the Indian government struggled to make purchases for its own domestic food bank and ration program, according to Indian agricultural researchers and government statistics.

Like many other countries, India is also struggling with rising inflation that is biting into household budgets and even diets. Food inflation rose 8.3 percent in April, the government said.

Egypt, the world’s largest importer of Russian and Ukrainian wheat, recently negotiated with India to import 1 million tons. Turkey and several countries in Africa, which also rely on wheat imports from the Black Sea region, have also lined up to buy from India in recent weeks. India recently sent trade delegations to nine countries, including Tunisia, Morocco and Indonesia, to discuss ramping up exports.

“At a time when the world is struggling with wheat shortages, India’s farmers have stepped forward to feed the world,” Prime Minister Narendra Modi said during a visit to Germany earlier this month. “When humanity faces a crisis, India will come up with a solution.”

To help scale up wheat exports, the Indian government has rushed to set up 200 labs to conduct export quality checks, add more rail cars for transportation and prioritize exports from ports.

Egypt approved India as wheat supplier in April, Commerce Secretary Piyush Goyal said in a tweet, adding that the country was “ready to serve the world”.

Now it is not immediately clear which deals will go through. The Commerce Department, which oversees the trade, said in its Friday order that shipments for which irrevocable letters of credit had been issued may continue. The Indian government could also grant special permission for exports to countries “to meet their food security needs”. Otherwise, all exports will be frozen.

Tunisia one of the countries severely affected by the war in Ukraine

Analysts said the decision to suspend exports was the right one at a time of global uncertainty.

“We need to maintain a surplus given the climate anomalies and food security concerns,” said Devinder Sharma, an agricultural policy expert. “We have such a large population to care for. Who knows [whether] maybe the pandemic won’t come back?”

Due to the pandemic, the federal government provided five kilograms of wheat or rice and just over one kilogram of pulses per person each month, in addition to existing food subsidies. Earlier this year, the program was extended to September.

But the strain on the system became apparent when the government announced last week that it would supply more rice instead of wheat under the program.

Government procurement of wheat fell to a 15-year low this year to below 20 million tons, after reaching a record high of 43 million tons in 2021. Exports were a key factor.

The skyrocketing global wheat prices meant a bonanza for traders. The World Bank forecast in April that wheat prices are expected to hit an all-time high this year, rising more than 40 percent. Wheat exports from India have more than tripled.

Falling production, rapidly growing exports and high fuel prices have led to a sharp rise in domestic wheat prices in recent weeks. Wheat is one of the most popular staple foods in the country, and rising prices are weighing down consumers across the board.

Experts said India’s last wheat crisis in 2005 served as a warning. India’s high exports depleted its reserves, forcing it to import wheat in the following years.

“India shouldn’t make the same mistake,” Sharma said. Next year, if the need arises, “stock may not be available and prices will be prohibitive.”

Leave a Comment