Russia-Ukraine conflict gives Indian wheat a global chance

The Russia-Ukraine
conflict has created a rare window of opportunity for India to clear its
massive stockpile of wheat. Russia and Ukraine together account for over a
quarter of the world’s wheat supply. But now, with the zone imbued in heavy
conflict, wheat supply has dropped substantially. This shortage has allowed
India, which grows a massive amount of wheat that then has to be acquired by
the government, to cash-in.

Since Russia
launched its “special military operation” in Ukraine which the West has defined
an invasion, wheat supply across the world has taken a hit and as a result
prices have soared. The international Chicago benchmark shows wheat prices to
have risen by 50% since war broke out in Ukraine. Global wheat prices have
soared to $14 dollars a bushel (approximately 30 kilos), according to
Commerzbank, a German lender.   

Amid the price
surge, the Indian government is attempting to fill the supply gap. Sudhanshu
Pandey, Indian food secretary, said India is set to export 7 million tonne
wheat this year, nearly half a million tonne more than the last year. The
Indian government believes that maize and corn growers can also benefit from
the opportunity.

However, the
window of opportunity does come with a caveat. Higher export amid a global
shortage may lead to a price rise in the domestic market. However, the
government is not worried about that right now. “At the moment, we are not
worried about prices rising because we have huge stocks and a new crop is about
to come,” said Pandey. India hopes to harvest 111 million tonne this year.   

But Pushan Sharma
from Crisil Research, who spoke to Hindustan Times, said the impact of the
Russia-Ukraine crisis is a “mixed bag”. This is because, while Indian wheat
will see a rise in export, India will have to pay an even larger price in
import duty to bring in edible oil.

Moreover, if Indian
wheat exports rise 45-50% in 2022, it “will expectedly push up price of grain
from 8-10% from a year ago to the first quarter of the next fiscal,” Sharma
said.