Buyers relied on Indian crops to supply some of the demand created by the war in Ukraine
India banned wheat exports from Saturday (May 14, 2022) due to the sudden increase in cereal prices on the world market. The Indian government says the measure aims to avoid risks to the country’s food security. The decision was mainly motivated by the conflict in Ukraine and the heat waves that hampered the production of the commodity in the country.
“Wheat export policy is prohibited with immediate effect”, except for submissions “for which an irrevocable letter of credit has already been issued” prior to this notification, declared the Directorate General of Foreign Trade of India.
The government also stated that it can issue a special license to export wheat to countries that are at risk of experiencing food shortages and thus meet their needs. The decision can be reviewed at a more favorable time.
According to the authorities, the measure was adopted “whereas the Government of India is committed to the food security requirements of India, neighboring countries and other vulnerable developing countries that are adversely affected by sudden changes in the world food market and are unable to access sufficient supplies of wheat”.
India is the second largest producer of wheat, harvesting around 107 million tonnes annually, which represents 13.5% of world production, according to data from the Indian Ministry of Commerce. However, most of this harvest is destined for domestic consumption.
global impact
Global buyers were banking on India to supply some of the demand created by falling exports from Ukraine and Russia, caused by the Russian invasion of the neighboring country. The two countries involved in the conflict represent about 30% of world exports of this cereal.
The ban’s announcement comes just days after the Indian Ministry of Commerce set a target for this fiscal year of 10 million tonnes of wheat for export.
In the last fiscal year 2021-2022, India surpassed its wheat export record, reaching 7 million tons of this cereal. The ban contradicts statements made in April by Indian Prime Minister Narendra Modi when he said the country could feed the rest of the world if the World Trade Organization (WTO) allowed it.
Indian officials pointed out that there had not been a dramatic drop in wheat production this year, but unregulated exports were causing local prices to rise. The value of the cereal has soared on the world market since the start of Russia’s invasion of Ukraine on February 24. Since the beginning of the year, the global price of commodity rose more than 40%.
The increase in the price of wheat, added to that of other foods and oil, raised inflation in India to 7.79% in April, its highest level since May 2014. In addition, the country has faced several waves in recent weeks. severe heat events, reaching 47 degrees Celsius in some regions, which devastated their fields and reduced crop yields.
Although not one of the biggest exporters in the world, the ban in India could drive up the price of commodity in global markets, hitting the poorest consumers in countries in Asia and Africa hard.
G7 Criticism
Agriculture ministers from the G7, a group of seven most industrialized countries in the world, criticized the Indian decision. “If everyone starts imposing export restrictions or closing markets, it will make the crisis worse.”, said the head of the German portfolio, Cem Ozdemir.
The minister also recalled that about 20 million tons of wheat are stored in Ukraine and urgently need to be exported. Due to the war, the Ukrainian ports that shipped the grain are surrounded by Russian ships and were isolated from the world. Ukraine was responsible for producing 12% of the world’s wheat, 15% of corn and half of sunflower oil.
The G7 ministers also urged countries not to take restrictive measures that could further strain markets.
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