May 20, 2022

India bans wheat exports after supply crunch

India bans wheat exports after supply crunch

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After Russia’s invasion of Ukraine – two countries that together consume nearly a third of the world’s wheat supply – pushed food prices to record levels, India was supposed to step in to fill the void. Not anymore.

The world’s second largest wheat-producing country on Friday banned grain exports amid food security concerns, which could exacerbate a sharp rise in global food prices that affects billions of people and threatens food security worldwide.

In the Commerce Department order, Indian officials said they made the decision after considering India’s own needs and those of neighboring countries. The ministry said India’s food security was “at risk” due to high global prices.

The announcement represented a surprising reversal weeks after Indian officials and international analysts spoke of the possibility that India could dramatically ramp up exports to fill a gap created in part by the war in Ukraine. global food prices It has risen to record levels in recent months, putting pressure on billions of people, particularly the world’s poorest, UN officials have warned.

India is trying to adapt to extreme temperatures but is paying a heavy price

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

Like many countries, India also suffers from high rates of inflation affecting household budgets and even diets. food swell The government said it rose 8.3 percent in April.

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

Prime Minister Narendra Modi said earlier this month during visit to Germany. “When humanity faces a crisis, India comes up with a solution.”

for help Increased wheat exportsThe Indian government scrambled to set up 200 export quality inspection laboratories, added more railcars for transport, and prioritized exports from ports.

Egypt agreed to India as a supplier of wheat 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 which deals will take place. The Commerce Department, which oversees trade, said in its order issued on Friday that shipments for which irrevocable letters of credit were issued will be allowed to continue. The Indian government can also give special permission to export to countries to ‘meet food security needs’. Otherwise, all exports are frozen.

Tunisia is among the countries that experienced significant economic consequences from the war in Ukraine

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

“We must maintain 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 do you know [whether] May the epidemic never come again? “

Through the pandemic, the federal government has provided five kilograms (11 pounds) of wheat or rice and just over one kilogram (2.2 pounds) of pulses per person per month on top of existing food support. Earlier this year, the program was extended through September.

But the pressure on the regime was evident when the government announced last week that it would provide more Rice instead of wheat under the program.

Government wheat purchases fell to Lowest level in 15 years this year to less than 20 million tons after a record high of 43 million tons in 2021. Exports were a major factor.

The skyrocketing world wheat prices made traders boom. The World Bank expected in April that wheat prices would reach the level of absolutely high This year, by more than 40 per cent. Wheat exports from India tripled.

Falling production, booming exports and rising fuel prices have led to a sharp rise in domestic wheat prices in recent weeks. Wheat is one of the most popular foodstuffs in the country, and rising prices are hurting consumers across the board.

Experts said in India last wheat crisis in 2005 served as a cautionary tale. The rise in Indian exports depleted its reserves, forcing it to import wheat in the following years.

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