India’s wheat farmers are considering skipping government purchases at minimal support price and selling instead to exporters, as the staple grain trades globally at a premium during the war in Ukraine.
The crisis between Russia and Ukraine is leading to a spike in global wheat prices, helping Indian farmers to skip government contracts at minimal support prices and opt for higher rates offered by private players.
“Wheat farmers in Madhya Pradesh, Punjab and other parts have been receiving inquiries from food grain exporters since last week,” Pushpendra Singh, president of a farmers’ union Kisan Shakti Sangh, told BloombergQuint by phone.
Traders are willing to pay up to Rs 2,700 per quintal including freight charges at Kandla port, Singh said. The government purchases wheat at an MSP of Rs 2,015 per quintal.
Since the invasion, wheat futures soared to a record over $14 per bushel, and are now trading at nearly $11.5 per bushel or about Rs 3,200 per quintal. Prices remained below $8 per bushel last year and remained below $6 from 2016 to 2020.
“Since the first week of March, spot prices of wheat have been above Rs 3,000 per quintal. Prices have increased by more than Rs 300 per quintal,” said Rajesh Jain, a private exporter.
According to data from the official website of the US Department of Agriculture, Russia and Ukraine together account for 27.6% of global wheat exports. The crisis between Russia and Ukraine forced the port to close in the Black Sea, stifling global supplies. That helped India’s staple food exports.
By the end of February, we have already exported 6.6 million tons of wheat, reaching the historic record 6.5 million tons reached earlier in the 2012-2013 fiscal year,” said Sudhanshu Pandey, India’s food secretary. last week. 7 million tons plus exports this year.”
According to the Food and Agriculture Organization of the United Nations, India is the second largest wheat producer after China, followed by Russia. According to government estimates, the country’s wheat production is expected to hit a new high of 111.32 million tons in the 2021-2022 harvest year, compared to 109.59 million tons in the previous year.
Indian farmers also benefit as the rabi crop will reach the mandis from this week, while other global producers will have to wait until June-July for harvest.
On March 1, 2021, the Food Corporation of India had 24 million tons of wheat. Under World Trade Organization rules, the stock is for domestic consumption only and cannot be exported.
The government is expected to purchase 44.4 million tons of wheat during the upcoming 2022-23 rabi season, which is slightly higher than in 2021-22. According to a Commerce Ministry official, who wishes to remain anonymous, actual purchases are expected to be lower, at around 36 MT, due to higher exports. The details are not yet public.
The government sees an opportunity for private players and farmers’ organizations to do business directly, the official said. That will lower purchase numbers, the official said.
Questions emailed to the Department of Commerce about the expected decline in government procurement went unanswered.
“More private interests and fewer government purchases are beneficial to the Center because it otherwise provides compensation in the form of grants to the states for the economic costs of procurement,” said DK Srivastava, chief policy advisor at EY. “This is also a better financial deal for the farmer who would otherwise have to sell his products at MSP.”
The Pradhan Mantri Garib Kalyan Yojana, aimed at providing free food grains, also expires this month, further cutting India’s food subsidy.
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