June 24, 2022: India decided to ban wheat export shortly after announcing exports if WTO permitted. Why?
India’s move to restrict wheat exports is set to reverberate through global agricultural markets, exposing just how tight global supplies are after the war in Ukraine and threatening to drive up food prices even more.
Agriculture ministers from the Group of Seven nations (G7) on Saturday emphasised that India's decision to ban wheat exports would worsen the global food shortage. "If everyone starts to impose export restrictions or to close markets, that would worsen the crisis," the German agriculture minister was quoted as saying by Reuters.
The G7 is an informal grouping of seven of the world’s advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union.
The surprising thing is that India still isn’t a prominent exporter on the world stage. India though holds the status of the 2nd largest wheat producer in the world after China, like China it also doesn't hold a prominent position in the list of major exporters of wheat.
So what happened? War is bad, food shortage is equally sad but still the opportunist in us should have been smiling at India's opportunity to get a short term boost in economy and to be seen as a saviour. But here we are, considering a ban on exports?
Let NewzPepper give you an insight on the possible negative results anticipated and the roadblocks faced by the decision makers
First, why the shortage?
Now of course you all are aware about Russia's ongoing invasion of Ukraine which has led to a major slow down on these exports.
Both the nations (Russia and Ukraine) held the top slot and the 5th largest respectively in the list of largest exporters. Russia alone, as per 2020 data held 13.1% of the total global export market and Ukraine held a respectable 8.5% share of the market.
Now what does the war have to do with wheat export from these countries you may ask?
Ukraine had to halt supplies as Russia has disrupted the export chain out of the country and also Ukraine has a bigger task at hand resisting Russian invasion so they can't focus on Exporting wheat and other supplies.
Russia would have loved to continue with the wheat export and even take over a part of Ukraine's wheat export contract but the sanctions imposed by Nations supporting Ukraine is making it difficult for them to find many buyers. A few Russia - Ukraine neutral nations and countries supporting Russia have to deal with Russian Rubles and Russia with individual countries currency whereas US Dollars has been the most widely accepted exchange currency worldwide. Russia is also kind of worried of accumulating currencies of individual nations which might not be accepted in trade worldwide later once matters normalize.
Image source: Photo by Ahmed Zalabany Dietmar Reichle Андрей Сизов on Unsplash
Apart from the spike in prices due to short supply from the suppliers (Russia & Ukraine), fertilizer shortages and poor harvests globally has fueled inflation globally and the poor nations are uncertain of the times ahead.
Why the ban?
Why are India and China not making money by exporting wheat when they are producing so much? you must be thinking. We will only talk about India here and what india has to say about the wheat export ban:
1. India, like China, consumes most of the produce internally due to the high population and demand within the countries itself. The world's second-largest wheat producer, i.e. India,, said that factors including lower production and sharply higher global prices meant it worried about the food security of its own 1.4 billion people.
2. The current heat wave has made India worried about the crop produce. In February India had forecast wheat production at 111.32 million tonnes, which would have been a record crop production for over 5 years in a row now. But in May itself the forecast was reduced to 105 million tonnes anticipating lower production due to the heat wave. There are speculations that it might go down even lower.
3. No one was ready for this war between 2 nations and it took everyone by surprise. The transport system and logistics was not exactly prepared for this kind of supply worldwide.
4. As per Indian government, the ban is flexible and not a blanket ban on export of wheat. The countries to whom India has already committed supply will get their supplies and and requests from neighbouring nations or countries in dire need of grain will be considered.
5. Export to European countries has strict quality requirements for the kind of produce wheat is used for making which was being fulfilled by Russia, Ukraine, US, Australia, Canada and a few more European countries i.e. more than 77% of the world's requirement by the top 6 exporters before India gets its share at the 10th spot. Experts do opine that India is being careful with the export unless the quality of wheat is thoroughly checked before it supplies the grains for consumption.
Image source: Photo by Koushik Das Zubair Hussain Wesual Click on Unsplash
"We don't want wheat to go in an unregulated manner where it may either get hoarded and is not used for the purpose which we are hoping it will be used for –- which is serving the food requirements of vulnerable nations and vulnerable people," said BVR Subrahmanyam, India's commerce secretary.
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