Home ›› 15 May 2022 ›› Front
India’s ban of wheat exports may cause the local prices of wheat, bread, animal feed and even rice to further skyrocket, as Bangladesh is heavily dependent on the neighbouring country for this food grain.
The commerce ministry of India – the world’s second-largest wheat producer – in a notice on Friday stated that all wheat exports are banned with immediate effect, with some exceptions, because a sudden spike in the crop’s price had threatened India’s food security.
It added that the Indian government will only export shipments for which letters of credit (LCs) were issued on or before Friday’s notification, and limited exports will be allowed at the request of individual governments whose own food supply is vulnerable.
Bangladesh had already suspended importing wheat from its two other major sources Russia and Ukraine due to the ongoing war.
Homegrown wheat meets 13% demand
Bangladesh is almost entirely dependent on wheat imports, and is among the crop’s top five importers in the world. The country’s local production meets approximately 13 percent of the food grain’s total demand.
The United States Department of Agriculture (USDA) calculates wheat Marketing Year (MY) from June 1 to May 31.
In the first seven months of MY 2021-22, India exported around 2.8 million tonnes of wheat to Bangladesh, and captured 66 per cent of the market share, followed by Ukraine at 15 per cent, Russia 7 per cent, Canada 6 per cent, and Australia 5 per cent.
In the same period previous MY, India and Russia each had fulfilled 26 per cent of Bangladesh’s wheat import demands, followed by Canada at 20 per cent, and Ukraine 16 per cent, Australia 4 per cent, USA 3 per cent, Argentina 3 per cent, and others 2 per cent.
The USDA data further revealed that Bangladesh consumed 89 lakh tonnes of wheat in the MY 2020-21, and imported around 76 lakh tonnes of the food grain. Until January MY22, Bangladesh had imported 42.42 lakh tonnes of wheat, and expected 11 lakh tonnes of local production.
Bangladesh began procuring wheat from India in significant volumes in 2020. Shorter shipment times, low freight cost, and geographic proximity make India one of the preferred wheat exporters to Bangladesh. Indian wheat is transported to Bangladesh via road and rail.
As it is no longer possible to import wheat from Russia and Ukraine, Bangladeshi importers were looking towards India to fill the gap. Several government officials and importers said they will now look to Australia, Canada, and the USA for higher quality wheat.
Stakeholders however pointed out that as the quality of wheat is better in Australia and Canada, the rates are much higher too, which will cause the local prices to go higher and put more economic burden on the low income groups.
‘Over-reliance on rice may hike prices’
Food ministry Secretary Mosammat Nazmanara Khanum told The Business Post, “India’s ban on wheat exports will not affect the 3 lakh tonnes of this food grain already contracted for import by Bangladesh.
“A third of the amount, 1 lakh tonne, is already onboard a ship for Bangladesh.”
She continued, “If flour and bread prices go higher than rice, then consumers – especially the middle and low income groups – will begin relying more on the latter.
“This is our key concern because the rice market has not been stable for the last two years. If more consumers are forced to rely on rice, the price of this food grain could go even higher. This is why we are focusing on further increasing the supply of rice.”
According to food ministry data, the government held 1.18 lakh tonnes of wheat in state warehouses until Thursday.
The government’s stock of wheat, including the 3 lakh tonne contracted for import – are now on the way, is enough to cover distribution till the end of this August. The ministry however could not provide any data on the volume of wheat currently stocked by private importers.
The food secretary added that the Bangladesh government recently signed a memorandum of understanding (MoU) with Bulgaria to procure wheat.
Mohammad Mustafa Haider, group director of TK Group, said, “Local importers will face supply shortages due to India’s recent ban on wheat exports, which in turn will severely impact the local market.
“Import from Russia or Ukraine is quite impossible due to the ongoing war. Meanwhile, Australia and Canada’s wheat prices are much higher. This is why the price of wheat, flour, bread, animal feed and rice will increase yet again.”
Biswajit Saha, director of Corporate and Regulatory Affairs at City Group, said per kilogram wheat in the Indian market is $0.34, but it is around $0.56 in Canada.
He added, “If we want to meet the food grain’s demand through imports from Canada or Australia, the price will be much higher. We do not have enough stock of wheat to last till India’s next harvest season.
“But if we do not import the food grain at higher prices, the local market will face serious shortages.”
International media reports say India’s ban on wheat exports could compound a worldwide shortfall worsened by the war in Ukraine, and exacerbate an already dire forecast for hunger across the globe.
The war has interrupted wheat production in Ukraine and Russia, which are major suppliers of this food grain.
Fighting and blockades in the Black Sea have disrupted transport of the grain as well. Poor harvests in China, along with a heat wave in India and drought in other countries, have further choked global supply.
