India, the second-largest wheat producer in the world, banned its wheat export in May 2022. This decision followed as Russia’s invasion of Ukraine increased India’s exports, driving up local wheat prices. However, the wheat export ban failed to stop domestic prices from increasing as a sudden temperature rise reduced last year's output.
According to Reuters, the new season in India appears promising. However, slightly warmer-than-average weather in April, when farmers harvest the wheat, might still cause the crop to shrink. Therefore, the top government officials from the food, farm, and trade ministries are supposed to review the current wheat export ban by the end of April.
If you are interested in the world’s grain export, particularly India export ban on wheat, keep reading. We will analyze the development of the Indian wheat market and its export curb in 2023 and 2024.
Why Is India Banning Wheat Exports?
In February 2022, Russia's invasion of Ukraine interrupted Black Sea wheat exports. So, India became a reasonably priced wheat and wheat flour source for international consumers.
In 2022, India exported almost 8 million tonnes of wheat and 400,000 tonnes of wheat flour, primarily to countries in the Middle East and South Asia. As a result, India's wheat flour exports increased fourfold from the previous year to a new high in May 2022.
This high export demand and lower-than-expected wheat harvest last year have led to record-high domestic prices for wheat and wheat-derived products. Consequently, India bans wheat exports in May 2022.
So, the primary purpose of India wheat export ban is to lower domestic prices and replenish state reserves. According to the government source interviewed by Reuters, the idea is to ensure that the government's own wheat procurement increases this year. "We do not want a repeat of last year," resumed a government insider who wished to remain unnamed.
In advance of the state elections this year and general elections in 2024, the government is more exposed to criticism from the opposition parties due to higher food costs. The amount of wheat the government purchased from farmers decreased by 53% last year due to the high open market prices.
To manage the largest food welfare program in the world, the government purchases rice and wheat from farmers at fixed state prices. Building stockpiles and lowering prices are priorities. By acquiring as much of the farmers' crop as is practical, the government aims to increase the amount of wheat in the stockpile.
How Will the Indian Wheat Market Look in 2023?
In 2022, only 95 million tonnes of wheat were produced in India. It is lower than the predicted 105 million tonnes of local wheat demand. The lowest monthly total in six years was reached on January 1, 2023, when wheat stocks in government storage facilities dropped 47.9% to 17.2 million tonnes.
Domestic wheat costs rose to an all-time high of 32,500 rupees ($393.53) per tonne in January 2023, surpassing the government's planned purchase price of 21,250 ($259.80) rupees per tonne. In 2023, India is expected to produce a record 112 million tonnes of wheat, which should exceed the predicted local demand.
Despite the optimistic forecast, the country's farmers are worried about the sweltering heat predicted for the upcoming months. According to India's weather authority, April and May might bring intense heat waves and unusually high temperatures to large portions of the nation.
Farmers are becoming concerned that their output may face yet another setback. They have already been suffering from fertilizer scarcity on a global scale. Therefore, extreme weather circumstances in April and May 2023 might lead to a wheat harvest decline and the growth of local grain prices in India.