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The war in Ukraine has presented a rare opportunity for India to profitably export large quantities of wheat from its stockpiles, as global prices have surged above the domestic minimum support price, but cashing in on the opportunity isn’t without risks and hurdles, experts, traders and officials said. India’s wheat exports are sure to rise, benefiting commodity traders and farmers, due to a large void in global stocks, as supplies from warring Russia and Ukraine are shrinking, most people said. The two nations together account for up to 30% of global wheat exports.
The central government is pushing to fill the gap, asking diplomatic missions to facilitate outbound shipments, food secretary Sudhanshu Pandey said. India is set to export a record 7 million tonne of wheat this year, higher than the previous record of 6.5 million tonne in 2012-13.
India will have to keep a watch on grain exports to ensure domestic prices don’t rise, analysts cautioned.
Global wheat prices have hit record highs since Russia invaded Ukraine. The international Chicago benchmark for wheat rose 50% after war broke out in eastern Europe, with global prices touching nearly $14 a bushel (approximately 30kg), German lender Commerzbank said in a note. Maize growers will benefit too, as Indian corn can fill Ukraine’s 13% export share.
“At the moment, we are not worried about prices rising because we have huge stocks and a new crop (harvests) is about to come,” Pandey said, adding India is expecting 111 million tonne of new wheat harvest.
The impact of the Ukraine crisis on India is a mixed bag, analysts said. “It’s both a boon and bane,” said economist Pushan Sharma of Crisil Research. India will gain from wheat and maize exports and cheaper Russian oil, but will pay higher import bills for edible oil it imports from Russia and Ukraine.
If Indian wheat exports rise by 45-50% in 2022, it will “expectedly push up price of the grain 8-10% from a year ago in the first quarter of next fiscal”, Sharma said. At 14%, India’s share in global wheat output is roughly equal to combined share of Russia and Ukraine. Yet, a billion-plus population means the country’s share in global wheat exports is just around 3%.
There’s another reason for lower grain exports. Indian wheat is not competitive globally. Domestic prices are set by the government through its procurement policy while global prices are usually lower, often rendering exports non-viable.
Traders are ramping up shipments, but navigating constraints too. Broken global supply lines due to the pandemic have been further impacted by the Ukraine war.
“Exports have picked up, but shipping costs are rising and shipping routes are changing,” said exporter Surjit Singh of Hira Impex. “There’s a global shortage of containers too.”
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