The war between Russia and Ukraine has given India an impetus to take the opportunity and export wheat to other countries, but this has its own consequences of further price increase of wheat and wheat-related products in the domestic market.
With the price rise of almost every commodity, it was only a matter of time before wheat products also became more expensive as a result of the ongoing war between Russia and Ukraine. The war between Russia and Ukraine has led to a cessation of wheat exports from Russia; this has given India a boost to seize this opportunity as the country is the second largest wheat producer in the world. The catch here is that if India gets ambitious in this area, there could be a scarcity of domestic supplies in the coming months, leading to further price inflation of wheat products.
“Although India is very well positioned in wheat, as we have surpluses and also have fantastic harvests this year, there was less demand for our wheat than in Ukraine. However, due to the war situation, the demand for wheat in India has increased dramatically, which has led to a price increase of about 10-15 percent, which in turn leads to more expensive wheat-related products with prices increasing by 10-12 percent,” said Krishnarao Buddha, Senior Category Head, Parle Products. Parle offers a range of wheat bakery products as a main ingredient.
Wheat price rises by about 20 percent
“We are seeing an upward trend in price and in the past 10 days, prices of wheat-related products have increased by 20 percent. Export demand will do that,” said Angshu Mallick, Managing Director & CEO, Adani Wilmar.
Not just bakeries, India is largely dependent on wheat for daily household consumption, bakery products and even breweries. “The crisis between Russia and Ukraine has led to a 15-20 percent increase in wheat prices within a month, affecting wheat-related products in the country,” said Ashish Khandelwal, general manager of BL Agro.
Read more: India’s household spending could skyrocket due to Russia-Ukraine war; companies look at input costs
Why Indian wheat exports have suddenly become viable?
Global wheat prices have risen to a 14-year high due to supply disruptions from the Black Sea region, according to a Reuters report, while Indian warehouses are full of wheat after five consecutive record crops. India has had a wheat surplus in recent years, but the country has struggled to export more due to the annual increase in aid or guaranteed prices offered to growers by the government, making Indian wheat more expensive than the world price. However, the combination of factors such as high global wheat prices, the low rupee and strong demand from traders looking to take advantage of the opportunities has made Indian wheat attractive.
How much global wheat can India supply?
The Union’s food secretary, Sudhanshu Pandey, had said that at the end of February, exports of the main food grain reached 66 lakh tons, which is higher than the previous best of 65 lakh tons in 2013-14. This can reach 70 lakh tons by the end of March. “India’s wheat exports will benefit from the supply shortages caused by the war between Russia and Ukraine. But India’s share of total global wheat exports is less than 1 percent and there are limits to how much this can be increased given the great domestic need,” said Priyanka Kishore, head of India and SEA Economics, Oxford Economics.
How will an export surplus affect domestic prices and demand?
India has signed contracts in recent days to export about 500,000 tons of wheat in a bid to take advantage of a sharp rise in international prices. “Since India is the only country with wide availability of wheat, prices will certainly rise due to export opportunities to major countries in the Middle East and Asia. Export demand will continue and so wheat prices look bullish. minimum of 15-20 percent higher price of wheat products,” says Angshu Mallick.
Exports are expected to further increase prices in the coming months. “The new harvest will come in the first week of April and although traders can now look to exports for better prices, it will eventually have an impact at the end of the year. If we sell in surplus, we will have to deal with next season with scarcity. If this continues, there could be a further increase in wheat prices of about 20 percent in the next 6-8 months,” said Ashish Khandelwal. Krishnarao Buddha also claimed the impact of this will be “immediate” and will be seen as ‘further price increase around the May-June quarter’.
Export wheat at international prices, or use in India at MSP?
In addition, with wheat prices rising and exports increasing, government purchases, which begin in April, will also be slow to react in many states, as market prices are currently above the MSP and a likely ban or export restriction can be expected in the coming period. . days, industry players said. For the period July 2021-June 2022, the government had increased the MSP for wheat by Rs 40 to Rs 2,015 per quintal last year. “If the volume of exports increases dramatically, the government can impose export duties rather than a sudden ban and will review further measures based on domestic supply and demand,” said Angshu Mallick.
This post Wheat, wheat product prices rise amid crisis in Ukraine: good for India, not for Indians
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