Ukraine war: Global wheat prices have a big jump
Wheat prices have jumped on international markets after the Indian government banned wheat exports. This has led to disruptions in global supply and a large spike in demand. The benchmark wheat index rose as much as 5.9% in Chicago, the highest it has been in two-months.
India’s export ban has a lot to do with the recent heatwave hitting India. The inability for crops to be harvested is causing a spike in prices of staples like bread and noodles, leading many Indians to struggle.
India’s government recently announced the lifting of a ban on exporting grains to other countries that have confirmed food supply “requirements”. The announcement is welcome news for exporters and food producers and may ease global pressure on India.
However, the decision has been criticised by agriculture ministers from the Group of Seven (G7) nations meeting in Germany.
“If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,” German food and agriculture minister Cem Ozdemir said.
The G7 is an organisation of the world’s seven largest so-called “advanced” economies, which dominate global trade and the international financial system. They are Canada, France, Germany, Italy, Japan, the UK and the United States.
Although India is the world’s second-biggest wheat producer, it has not previously been a major exporter as most of its crop is sold on domestic markets.
But Ukraine’s wheat exports plunged after the Russian invasion. And with droughts and floods threatening crops in other major producers, commodity traders were expecting supplies from India to make up for part of the shortfall.
Before the ban, India had aimed to ship a record 10 million tonnes of wheat this year.
India’s wheat export U-turn
The Indian government seems to be bullish about increasing wheat exports, especially with demand soaring worldwide. They echo Prime Minister Modi’s statement: “India is confident of doing well”.
The decision for the ban within India was a U-turn because of the concerns of rising prices & inflation as well as to US sanctions on trade. However, it could be a foreign policy challenge for India since there is a lot of concern over US sanctions on trade.
India is a world power and has been called upon by trade agreements to do what’s best for the nation. The country doesn’t want to export grains they’ve bought from farmers at a fixed price, as they have been written into law in order to set up official reserves. This rule would make it harder for Delhi to do so without demanding incentives.Indian wheat is facing some tough competition from its rivals outside their country. So, India has been trying to find a way for countries outside of the continent to buy more and more of their product.
More countries are likely to be upset now, but they won’t bear the same brunt of hunger. The global food prices reached a record high in March, but it’s because of an event that happened in the Ukraine.
That came as the conflict cut off supplies from the world’s biggest exporter of sunflower oil – Ukraine – which means the costs of alternatives also climbed. The country is also a major producer of cereals such as maize and wheat, which have risen sharply in price too.
Food prices have been fairly high over time, but in April they did seem to show a minor dip. Despite this, they remain almost 30% higher than last year.
Rising food prices, along with a jump in the cost of energy, have been pushing up inflation around that world.