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India poised to plug wheat shortages caused by war in Ukraine

April 24, 2022
Consumer Packaged Goods

India’s wheat and rice stocks have been identified as having the potential to bump up supplies globally in the wake of the Russian invasion of Ukraine, plummeting commodities and soaring inflation. According to the Indian Council for Research on International Economic Relations, the region can export 22 million metric tons of rice and 16 million tons of wheat this fiscal year, which could dampen price hikes and lead to a more even keel in the market.

As supply shocks and price spikes continue to ripple through several countries amid the war in Ukraine, Indian Prime Minister Narendra Modi says the nation could step in to plug the gaps in the market.

India is one of the cheapest global suppliers of wheat and rice: it is already exporting rice to nearly 150 countries and wheat to 68 countries.

However, the country has faced food insecurity of its own in recent times and a move to help supply food stocks internationally would have to be approved by the World Trade Organization (WTO).

Food prices are surging globally, with some countries – like the UK – reporting the highest inflation levels in 30 years. COVID-19 pandemic disruptions, extreme weather, cyber-attacks and fuel shortages have driven production and supply costs up and demand is again rising.

WTO, the World Bank, the International Monetary Fund (IMF) and the United Nations World Food Program (WFP) have issued a joint statement urging coordinated action to help vulnerable countries address growing threats to food security.

The proposed actions include providing emergency food supplies, deploying financial support to households and countries, facilitating unhindered trade, and investing in sustainable food production and nutrition security.

Food price records exceeded

Commodity prices were already at a ten-year high before the war in Ukraine due to global harvest issues. According to the UN Food and Agricultural Organisation (UNFAO), Food Price Index commodity prices are now the highest they have been since 1990 as a result of the Russian-Ukrainian conflict.

World wheat prices soared by 19.7% this month, aggravated by concerns over crop conditions in the US.

Russia and Ukraine are two of the world’s major wheat exporters and account for about a third of global annual wheat sales. The two countries also account for 55% of the global annual sunflower oil exports and 17% of exports of maize and barley. Together, they were expected to export 14 million metric tons of wheat and over 16 million tons of maize this year, according to UNFAO.

The FAO Food Price Index surged to a new peak reaching its highest level in a decade. The index highlights the soaring cost of cereals and vegetable oils worldwide while noting that global food prices have increased 30% in the last year.

Indian traders, reacting to rising demand in the international market, entered contracts for exports of more than 3 million metric tons of wheat from April to July. Farm exports exceeded a record US$50 billion in 2021-2022.

“We are committed to combining our expertise and financing to quickly step up our policy and financial support to help vulnerable countries and households as well as to increase domestic agricultural production in, and supply to, impacted countries,” says WTO, the World Bank, the IMF and the WFP.

“We can mitigate balance of payments pressures and work with all countries to keep trade flows open. In addition, we will further reinforce our monitoring of food vulnerabilities and quickly expand our policy advice to affected countries guided by the comparative advantages of our respective institutions.”

Fertilizer limitations inhibit progress
As a basic component of farming, fertilizers are the unpredictable factor that could derail the use of Indian food stocks in mitigating the commodity crises.

India’s stocks fell low after the war initially broke out. The country imports di-ammonium phosphate and fertilizers containing nitrogen, phosphate, sulfur and potash. Russia and Belarus account for 40% of the world’s potash exports. Fertilizer prices are already high globally due to soaring gas prices.

A shortage of fertilizers could easily affect production in the next harvest season. If the war is prolonged, India might face logistical challenges in stepping up exports.

Regional inflation also hit an all-time high in March, increasing 7.68%. This was driven by price rises of edible oils, vegetables, cereals, milk, meat and fish.

“We also urge all countries to keep trade open and avoid restrictive measures such as export bans on food or fertilizer that further exacerbate the suffering of the most vulnerable people. It is especially important not to impose export restrictions on humanitarian food purchases by the UN’s World Food Program,” says WTO, the World Bank, the IMF and the WFP.

In addition, nutrition and food companies are currently grappling with supply chain disruptions and inflation, which have sent world food prices peaking at a ten-year high.

Food ingredient prices are predicted to continue rising globally throughout the year, with many experts warning of knock-on consequences of famine, political turmoil, social unrest and economic recession compounded by the Russian invasion of Ukraine.

By Inga de Jong


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