The food-supply crunch
India has exacerbated a global supply squeeze. Matthew Partridge reports
Global food prices surged when India announced at the weekend that it had imposed a ban on exports of wheat, “stoking pressure on food costs as tight global supplies roiled international markets”, say Hudson Lockett and Nic Fildes in the Financial Times. The move represents a change of mind for India’s government, which until recently had denied it would halt exports. It changed course as “domestic inflation surged to the highest level in eight years on the back of rising food prices”. The Indian government argues the ban is necessary to help secure India’s “overall food security”.
Batten down the hatches
India isn’t alone in deciding to “batten down the hatches” by restricting exports, rather than allowing producers free rein to “capitalise on record prices”, says Mehreen Khan in The Times. However, such moves risk “tipping the world’s poorest people into starvation” and could force other countries into “tit-for-tat retaliation to protect their domestic supply” – no less than 35 countries have already restricted the export of grain in recent months. India’s restrictions could backfire as the country is especially vulnerable to changes in global food prices, which account for 45% of its domestic inflation basket.
For all India’s harsh words, there are though grounds for hope that its grain export ban could prove to be “less explosive” in practice than it sounds in theory, says Jasmine Ng on Bloomberg. The government has, for example, said that it will not only allow producers to honour deals that were agreed before the ban came into force, but will also continue to export grain on a government-to-government basis. Indeed, almost immediately after the ban was announced, it was confirmed that Egypt’s purchase of 500,000 tonnes of Indian wheat will be allowed to go ahead. However, though the ban won’t completely stop Indian exports, there is no doubt it will reduce the total volume.
Ukraine-sized hole
Still, whatever trade the Indian government allows, it’s now pretty clear that hopes of an Indian “export boom” – that it could fill the gap left by the war in Ukraine and become the eighth largest exporter in the world – are now off the table, says Reuters. Predictions that improved seed selection and farm management could lead to a record crop yield this year have been scrapped in the wake of a severe heatwave, and the government now accepts that the country will struggle to cover its own “massive needs”. This is bad news for global markets, which had been “banking on millions of tonnes of Indian wheat being available for shipment over the coming months”.
The very fact that markets are paying so much attention to India, which has traditionally been a relatively minor exporter of wheat, “underscores the fragility of global food supplies”, says Diksha Madhok on CNN. Russia’s invasion of Ukraine, which is among the top five global exporters for a variety of key agricultural products, had already shocked global food markets. Russia is continuing to blockade Ukraine’s ports, and the country is now unable to sell those commodities – an estimated 20 million tonnes of wheat alone is stuck in transit. Expect more disruption.