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Food export bans, from India to Argentina, risk fueling inflation

Reuters . Mumbai
28 Jun 2022 00:00:00 | Update: 28 Jun 2022 00:45:40
Food export bans, from India to Argentina, risk fueling inflation
A worker sifts wheat before filling in sacks at the market yard of the Agriculture Product Marketing Committee (APMC) on the outskirts of Ahmedabad, India– Reuters Photo

It only took 24 hours last month for Prime Minister Narendra Modi’s government in India - the world’s second-largest producer of wheat - to shelve its plans to “feed the world”.

In April, Modi had said publicly that the world’s most populous democracy was ready to fill part of the gap left by Ukraine in global grains markets by increasing its wheat exports, following five consecutive record harvests. India traditionally exports only a modest amount of wheat, retaining most of its crop for domestic consumption.

On May 12, India’s Ministry of Commerce & Industry said it was preparing to send delegations to nine countries to export a record 10 million tonnes of wheat this fiscal year - sharply up the previous season.

But a barrage of alarming data changed all that.

First came a downward revision to India’s wheat crop in early May as a sudden heatwave hammered yields. Then data on May 12 showed inflation in the nation of 1.4 billion had jumped to a near eight-year high due to higher food and fuel prices, driven by the Ukraine war.

Alarmed by rising inflation, which had contributed to toppling the previous Congress party government in 2014, Modi’s office told the Ministry of Commerce on May 13 to put the “brakes on” wheat exports immediately, according to one government official, who asked not to be identified because of the sensitivity of the issue.

“This (inflation data) prompted the government to issue an order at midnight” imposing a ban on wheat exports, said a second source.

News of the ban by India, which is the only major wheat exporter at that time of year, drove Chicago wheat futures 6per cent higher after markets reopened on Monday.

Neither Modi’s office nor the Ministry of Commerce responded to a request for comment.

India is one of at least 19 countries that have introduced food export restrictions since the war in Ukraine sent prices soaring, hampering international trade flows for several agricultural products and sparking violent protests in some developing nations.

From Delhi to Kuala Lumpur, Buenos Aires to Belgrade, governments imposed restrictions, at a time when the economic damage caused by the Covid-19 pandemic, combined with factors such as extreme weather and supply chain bottlenecks, had already driven hunger across the globe to unprecedented levels.

The UN World Food Programme (WFP) said in April the number of people facing acute food insecurity - when their inability to consume adequate food puts their lives or livelihoods in danger - had already more than doubled since 2019 to 276 million in the 81 countries in which it operates, before the Ukraine conflict began.

The war - which disrupted exports from Russia and Ukraine, two agricultural powerhouses - was forecast to increase that number by at least 33 million, mostly in sub-Saharan Africa, it forecast. Under World Trade Organization rules, members can impose export prohibitions or restrictions of foodstuffs or other products if they are temporary and required to relieve “critical shortages”.

India’s Commerce Minister Piyush Goyal told Reuters last month he had been in contact with the WTO and the International Monetary Fund (IMF) to explain that India needed to prioritise its own food security, stabilize domestic prices and protect against hoarding.

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