War offers rare chance for agri-export boom, and risks too
India is set to export a record 7 million tonne of wheat this year, higher than the previous record of 6.5 million tonne in 2012-13.
The Russia-Ukraine crisis has opened doors for India to export large quantities of wheat from its stockpiles profitably – a rare chance -- as global prices have surged above domestic minimum support price (MSP), but cashing in on the opportunity isn’t without risks and hurdles, experts, traders and officials said.
India’s wheat exports are sure to go up, benefiting the agri-trade sector and farmers, due to a large void in global stocks, as supplies from war-torn Russia and Ukraine are shrinking, most people said. The two nations together account for up to 30% of global wheat exports.
The Union government is pushing to fill the gap, asking diplomatic missions abroad to facilitate outbound shipments, food secretary Sudhanshu Pandey said. India is set to export a record 7 million tonne of wheat this year, higher than the previous record of 6.5 million tonne in 2012-13.
Some analysts say India will have to keep a watch on grain exports to ensure domestic prices don’t rise, in turn.
Global wheat prices have hit record highs since Russia invaded Ukraine. The international Chicago benchmark for wheat rose 50% since Russian actions in Ukraine began, with global prices touching nearly $14 a bushel (approximately 30 kg), Commerzbank said in a note.
Maize growers will benefit too, as Indian corn can fill Ukraine’s % export 13gap.
“At the moment, we are not worried about prices rising because we have huge stocks and a new crop (harvests) is about to come,” the food secretary said, adding India is expecting 111 million tonne of new harvest.
The impact of the Ukraine crisis on India is mixed bag, analysts say. “It’s both a boon and bane,” said economist Pushan Sharma of Crisil Research Ltd.
India will gain from wheat and maize exports and cheaper Russian oil but will pay higher import bills for edible oil it imports from Russia and Ukraine.
If Indian wheat exports rise by 45-50% this calendar year, it will “expectedly push up price of the grain 8-10% from a year ago in the first quarter of next fiscal”, Sharma said.
At 14%, India’s share in global wheat output is roughly equal to combined share of Russia and Ukraine. Yet, a billion-plus population means the country’s share in global wheat exports is around 3%.
There’s another reason for lower grain exports. Indian wheat is not very competitive globally. Domestic prices are set by the government through its MSP policy while global prices are usually lower, often rendering exports non-viable.
Traders are ramping up shipments but are navigating constraints too. Broken global supply lines due to the pandemic have been further ruined by the Ukraine war.
“Exports have picked up, but shipping costs are rising and shipping routes are changing. There’s a global shortage of containers too,” said exporter Surjit Singh of Hira Impex Ltd.