India bans wheat exports after supply shortages

India bans wheat exports after supply shortages

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After Russia invaded Ukraine — two countries that together accounted for nearly a third of the world’s wheat supply — sending food prices to record highs, India was set to step in to fill the gap. No more.

The world’s second-largest wheat producer on Friday banned exports of the grain over its own food security concerns, potentially compounding the precipitous rise in global food prices that is affecting billions of people and threatening 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 is “under threat” due to 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 boost its exports to fill 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, particularly the world’s poorest, United Nations officials have warned.

India is trying to adapt to extreme heat but is paying a high price

But a record-breaking heatwave this spring — March was India’s hottest month on record — damaged India’s crop and in some cases reduced wheat production by as much as a quarter. As traders rushed to buy food to sell in the international market, the Indian government had difficulty making purchases for its own domestic food bank and rationing program, according to Indian agricultural researchers and government statistics.

Like many countries, India is struggling with rising inflation, which is affecting household budgets and even food. 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 African countries, which also depend 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 increasing exports.

“At a time when the world is facing wheat shortages, the farmers of India 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 boost wheat exports, the Indian government hastily set up 200 export quality testing laboratories, added more rail cars for transportation, and prioritized exports from ports.

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

Now it’s not immediately clear which deals will go through. The Department of Commerce, which oversees trade, said in its Friday order that deliveries for which irrevocable letters of credit have been issued will be allowed to proceed. The Indian government could also issue special permits for exports to countries “to meet their food security needs”. Otherwise all exports will be frozen.

Tunisia is one of the countries that see 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.

“Given the climatic variances and food security concerns, we should keep a surplus,” said Devinder Sharma, an expert on agricultural policy. “We have such a large population to take care of. who knows [whether] the pandemic might not come back?”

During the pandemic, the federal government supplied five kilograms of wheat or rice and just over a kilogram of legumes per person each month, in addition to existing food subsidies. Earlier this year, the program was extended through September.

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

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

Soaring global wheat prices meant a gold mine for traders. The World Bank forecast in April that wheat prices would hit an all-time high this year, rising more than 40 percent. Wheat exports from India have more than tripled.

Falling production, rising exports and high fuel prices have led to a sharp increase in domestic wheat prices in recent weeks. Wheat is one of the country’s most popular staples, and rising prices are weighing on consumers across the board.

Experts said India’s most recent wheat crisis in 2005 was a cautionary tale. India’s high exports depleted its reserves and forced it to import wheat in the years that followed.

“India should not make the same mistake,” Sharma said. If there is demand next year, “stocks may not be available and prices will be prohibitive.”

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