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India’s big wheat opportunity: How Delhi can make up for export shortfall from Russia, Ukraine

India is the world’s second-largest wheat producer after China, but a high consumption base has seldom allowed it to be a big exporter. This can change, at least in this year.

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New Delhi: Russia’s ongoing invasion of Ukraine has a silver lining for India — an opportunity to boost its wheat exports.

The war between the two wheat-surplus nations has raged on for a month now, with no end in sight. Consequently, this supply shock has made the global wheat prices climb — all working in India’s favour.

Averaging 100 million tonnes (MT) in the last five years, India is the world’s second-largest producer of wheat after China (133 MT), but a high consumption base has seldom allowed the country to be a big exporter.

According to the United Nations Food and Agriculture Organization (FAO), clubbed together, Russia and Ukraine produce more or less the same amount of wheat India does, 104 MT. However, these countries are collectively home to seven times fewer people (18-19 crore) than India (134 crore), which allows them to export huge quantities of wheat.

Hence, countries with inadequate wheat production, especially west Asia and north Africa , rely on Russia and Ukraine.


Also read: War no bar: India clears global pariah Russia’s move to invest in Indian corporate debt


Markets for Russia & Ukraine wheat

According to data available with the data visualisation site Observatory of Economic Complexity, in 2019, Russia’s wheat exports amounted to $8.14 billion, and Ukraine exported about $3.11 billion of wheat. Together, the countries accounted for a quarter of the world’s total wheat exports.

A huge chunk of this went to Egypt, which took about 31.3 per cent ($2.55 billion) of Russia’s and 22 per cent ($685 million) of Ukraine’s exports. These two countries meet about 70 per cent of Egypt’s wheat import demands, which is why the crisis has hit the country hard.

Egypt needs a huge amount of wheat to run its food subsidy programme, which provides subsidised bread to millions of its citizens, costing about $5.5 billion to its exchequer. With this war, its food security programme is now under a significant threat.

Countries like Indonesia, Turkey, Bangladesh, the Philippines, Tunisia, Morocco, Bangladesh, Yemen, Nigeria and Thailand also each buy over $100 million worth of wheat from Russia and Ukraine.

Can India grab the opportunity?

Despite being a wheat-rich nation, India used to export only 1 per cent of its produce and that too mostly to its neighbours — Bangladesh, Nepal and Sri Lanka — and others like the United Arab Emirates.

The Russia-Ukraine war has presented India a chance to grow its exports, especially when 24 MT of wheat is lying in government storage as of February 2022.

However, experts believe that India’s wheat faces a stiff market, and much of its competitiveness is dependent on high global commodity prices.

“This year, we can expect to export about 8-10 million tonnes of wheat. Mundra and Kandla (in Gujarat) will be our main ports,” said Siraj Hussain, former agriculture and food processing industries secretary.

It must be noted that India’s wheat exports were already soaring even before Russia invaded Ukraine, courtesy the Covid-19 pandemic, which restricted the global supply and resulted in higher global prices.

India exported about 2 MT of wheat in 2020-21 and in the April-January period of the ongoing 2021-22 fiscal, the country has already exported 6 MT, according to Ministry of Commerce and Industry.

Infographic: Manisha Yadav | ThePrint
Infographic: Manisha Yadav | ThePrint

The government of India offers a minimum support price (MSP) to the farmers at which it promises to pick up their stock. This MSP used to be higher than the market price, but the recent rise in global commodity prices made India a competitive supplier, claimed the International Agricultural Trade Report published by the US Department of Agriculture in July 2021.

As on 22 March, the global price of wheat already touched the 378 euros or about Rs 3,167 per quintal, which is way higher than the MSP fixed for this year at Rs 2,015/quintal.

Infographic: Manisha Yadav | ThePrint
Infographic: Manisha Yadav | ThePrint

Reports of farmers rushing to export wheat at Gujarat’s Kandla Port have also confirmed that there is an export rush from India’s side. But how long can it sustain?

“In the future it will depend on global prices. This year prices are record high due to war. If it ends and prices cool down, our competitiveness will also go down,” said Hussain.


Also read: Russia-Ukraine conflict looms over India’s steady economic recovery


What the experts say

Commodity research expert Rahul Chauhan told ThePrint that mandis in several states are buying wheat at a price higher than the MSP due to this rise in global price. “I think after 15 April, when arrivals are at peak, wheat prices may fall,” said Chauhan, who is director of IGrain India.

However, according to Prem Gupta, former president of Roller Flour Mills Federation, this is also an opportunity for India to create a market for itself in the world of wheat exports.

Gupta said India should act now to become one of the key players in the wheat exporting industry.

“Russia’s invasion has not only crashed Ukraine’s export infrastructure, but has forced many countries to look for alternatives outside Russia. These countries’ share, according to me, has come down from 25 per cent of the total global wheat exports to just 5-6 per cent and may take at least a year to start recovering, in case things don’t go worse,” Gupta said.

“In the aftermath of this, a global supply gap has emerged, 75 per cent of which can be filled by India. We are already expecting a bumper crop and the government also wants to liquidate its excessively filled storage bins. It’s a win-win situation right now. To my knowledge, we have exported almost two-three times more wheat than in the last one month and even the government is interested in raising wheat exports,” he added.

But this will not be an easy task, said Chauhan.

“Not only India, export demand of wheat is also increasing from Canada and Australia. Indian wheat does not meet certain terms like protein content and pesticide levels, but due to war, countries are bypassing norms and purchasing. The wheat produced in Haryana and Punjab is not exportable because of lower protein content, but the one produced in Madhya Pradesh, Uttar Pradesh, Gujarat and parts of Rajasthan may boost our exports,” he said.

According to Chauhan, the government is also keen to export as much as possible.

“The Indian government is also promoting the export of wheat. The Indian Railways is adding extra wagons to rails that will transport wheat; the government of Madhya Pradesh has also waived mandi taxes to promote the exports,” he added.

(Edited by Amit Upadhyaya)


Also read: Why new global recession may be the cost of punishing Putin for Ukraine invasion


 

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