India bans wheat exports after supply shortage

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After Russia invaded Ukraine – two countries that together accounted for almost a third of the world’s wheat supply – and sent food prices to record highs, India was supposed to step in to fill the void. . No more.

The world’s second largest wheat producer on Friday banned grain exports over its own food security concerns, potentially exacerbating the sharp rise in global food prices that is affecting billions of people and threatening food security in the world. world.

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

The announcement marked a sharp turnaround a few weeks after Indian officials and international analysts raised the possibility that India would significantly increase its exports to fill the vacuum created in part by the war in Ukraine. International food prices have hit record highs in recent months, putting pressure on billions of people, especially the world’s poorest, United Nations officials have warned.

India tries to adapt to extreme heat but pays a heavy price

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

Like many countries, India is also grappling with runaway inflation which is straining household budgets and even diets. Food inflation rose 8.3% in April, the government said.

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

“At a time when the world is facing a shortage of wheat, Indian farmers have stepped forward to feed the world,” Prime Minister Narendra Modi said earlier this month during a visit to Germany. “Whenever humanity faces a crisis, India finds a solution.”

To help boost wheat exports, the Indian government rushed to set up 200 laboratories for export quality checks, added more wagons for transport and prioritized exports from ports.

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

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

Tunisia among the countries suffering the major economic consequences of the war in Ukraine

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

“We should keep a surplus given the climatic aberrations and food security concerns,” said Devinder Sharma, an agricultural policy expert. “We have such a large population to take care of. Who knows [whether] the pandemic may not return? »

During the pandemic, the federal government provided five kilograms (11 pounds) of wheat or rice and just over one kilogram (2.2 pounds) of pulses per person each month in addition to existing food subsidies. Earlier this year, the program was extended until September.

But the strain on the system was clear when the government announced last week that it would provide more rice instead of wheat under the scheme.

Government purchases of wheat have fallen to their lowest level in 15 years this year, at less than 20 million tonnes, after a record 43 million tonnes in 2021. Exports have been a key factor.

Soaring world wheat prices meant a boon for traders. The World Bank predicted in April that wheat prices would hit a record high this year, rising more than 40%. India’s wheat exports more than tripled.

Lower production, booming exports and high fuel prices have driven domestic wheat prices up sharply in recent weeks. Wheat is one of the country’s most popular staple foods, and rising prices are pinching consumers across the board.

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

“India should not make the same mistake,” Sharma said. Next year, if the need arises, “stocks may not be available and prices will be unaffordable.”

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