What a fiasco: First, the wheat shortage was fueled by increases in fertilizer and energy prices. Then the invasion of Ukraine threatened North Africa’s wheat supply – Russia and Ukraine are both major wheat exporters. Now the hopes of the second largest wheat producer in the world – India – could be dashed. The reason: India’s record heat is having a negative impact on the wheat harvest and, after a delivery stop, is driving the wheat price to an all-time high.
In addition, there is a risk of severe famine and a massive wave of refugees in the summer.
At the moment, the already high wheat price caused by the Russian attack on Ukraine is being pushed up further by the heat wave in the important growing country India. In European trading on the Euronext stock exchange, a ton of wheat closed at EUR 438.25 on Monday. This is the highest price in history.
The background to the price increase is India’s export ban on wheat, which was announced at the end of last week. The country is the second largest wheat producer in the world – in 2021 it was almost 110 million tons – and has large reserves. However, India is currently suffering from the consequences of scorching heat: The country of 1.4 billion people recorded the warmest March since records began; Temperatures of up to 45 degrees Celsius have been measured in recent weeks. That affected the harvest. The yield estimate for this year has already been revised downwards by at least five percent.
With the export ban, the government in New Delhi now wants to ensure security of supply in the country itself. New Delhi is concerned about the country’s buffer stock, which is intended to avert a possible famine, but was recently largely used up as a result of the Corona crisis. Trade Minister BVR Subrahmanyam nevertheless emphasized that exports would continue to be permitted in the future with the express approval of the government.
Unlike Ukraine and Russia, India is not a major exporter for the world market. Most of the harvest is used to feed the local population; almost half of all wheat exports go to neighboring Bangladesh. But since the Ukraine war has led to a shortage of wheat on the world market, India has recently become increasingly important when it comes to helping countries that are particularly dependent on imports from Ukraine or Russia – for example in North Africa and the Near East.
India originally wanted to alleviate the global supply bottlenecks that arose in the course of the Ukraine war by increasing its wheat exports from seven million to around ten million tons. To this end, delegations should travel to Egypt, Turkey and other countries to discuss expanding wheat exports. It is unclear whether these visits will continue.