The Ukraine conflict has created a rare opportunity for India to profitably export large quantities of wheat from its stockpiles, as global prices have risen above the domestic minimum support price, but cashing in on the opportunity is not without risks and challenges, according to experts, traders, and officials.
Most people believe that India's wheat exports will increase, benefiting commodity traders and farmers, due to a large void in global stocks as supplies from warring Russia and Ukraine dwindle. Together, the two countries account for up to 30% of global wheat exports.
According to food secretary Sudhanshu Pandey, the central government is attempting to fill the void by requesting diplomatic missions to facilitate outbound shipments. This year, India is expected to export a record 7 million tonne of wheat, breaking the previous record of 6.5 million tonne set in 2012-13. Analysts warn that India must keep a close eye on grain exports to prevent domestic prices from rising.
Since Russia's invasion of Ukraine, global wheat prices have reached all-time highs. Following the outbreak of war in Ukraine, the Chicago benchmark for wheat increased by 50%, with global prices reaching nearly $14 per bushel (approximately 30kg), according to a note from German lender Commerzbank.
Maize farmers will benefit as well, as Indian corn will be able to fill Ukraine's 13 percent export share. "At the moment, we are not concerned about rising prices because we have huge stocks and a new crop (harvests) is about to arrive," Pandey said, adding that India expects a new wheat harvest of 111 million tonnes.
According to analysts, the impact of the Ukraine crisis on India is mixed. "It's both a boon and a curse," said Crisil Research economist Pushan Sharma. India will benefit from wheat and maize exports as well as cheaper Russian oil, but it will face higher import bills for edible oil imported from Russia and Ukraine.
If Indian wheat exports increase by 45-50 percent in 2022, the price of the grain will rise by 8-10 percent from a year ago in the first quarter of the next fiscal year, according to Sharma.
India's share of global wheat output, at 14 percent, is roughly equal to the combined share of Russia and Ukraine. Despite having a population of over a billion people, the country's share of global wheat exports is only about 3%.
Indian wheat is not globally competitive. The government sets domestic prices through its procurement policy, whereas global prices are usually lower. "Exports have increased, but shipping costs are rising and shipping routes are changing," said Hira Impex exporter Surjit Singh. "There is also a global container shortage."
