When India banned wheat exports as prices soared over Russia’s invasion of Ukraine, it provoked disquiet abroad and drove the cereal price even higher.
Now Indian farmers and traders are furious as they have been denied a windfall as domestic prices have plunged. Despite the fact that India is the world’s second-largest wheat producer, the government, which is also the country’s largest buyer of the crop, stated that it chose to protect food security for its massive population over inflation concerns.
The move–along with deteriorating global supplies from Russia and Ukraine, both among the world’s top five wheat exporters–sent prices to all-time highs on commodity exchanges in Chicago and Europe.
But at Asia’s largest grain market in Khanna, in India’s breadbasket state of Punjab, values went the other way. Every year, thousands of farmers from the wheat-growing region sell their produce at the facility, which is dominated by a dozen giant storage sheds, each the size of a football pitch. From 2,300 rupees (about $30) per 100 kilograms of wheat before the export ban, prices slumped to 2,015 rupees—the government-set minimum price at which it buys grain for its vast public distribution system.
India’s hundreds of millions of small farmers eke out a borderline existence, subject to the vagaries of the weather, and some in Punjab were already reeling from production losses due to a severe heat wave.
Before the war in Ukraine and the heat wave, India’s wheat production of 109 million tonnes in 2021 and seven million tonnes of exports had both been expected to rise this year. Prime Minister Narendra Modi last month even offered to help plug the global wheat deficit and “feed the world”.
But extreme weather conditions are becoming more frequent, a phenomenon experts say is driven by climate change. After producers in Punjab were hit by a heat wave, the national harvest came in at four million tonnes less than expected.
Federal and state authorities are cutting procurement for the public distribution system, which provides free and highly subsidized grains to nearly 800 million people, as food security schemes set up during the coronavirus pandemic are cut back. Even so, retail wheat flour prices are at a 12-year high.
So the government should have adopted a wait and watch policy before abruptly halting exports and causing market turmoil.
The market was already under stress from the harvest crisis when, without a thought, the government came up with the ban. The major losses will undoubtedly be borne by large exporters such as Cargill and Glencore, but small traders and farmers will also be affected.
And many businessmen in Khanna say the measure will only have a temporary effect as the rules of supply and demand are unavoidable.