Russia-Ukraine war has wheat crop rates soaring in India; 'unprecedented' prices, say farmers

Mahipal Singh Songra is a farmer from Madhya Pradesh's Ratlam district. He is happy as he has never sold his wheat at a price he sold yesterday on March 7.=

"I got Rs 3,000 for a quintal of my wheat. I sold a total of twenty two quintals. I have never seen wheat being procured at such rates ever before," an excited Songra told Gaon Connection. "The rates (of wheat) are rising every day! Last week, on March 4 my uncle sold his produce at a rate of Rs 2,771 a quintal. Even I received a rate of Rs 2,800 on March 6, which has now touched Rs 3,000 a quintal," he added.

The Cabinet Committee on Economic Affairs (CCEA) has fixed the minimum support price (MSP) for wheat at Rs 2,015 for the Rabi Marketing Season (RMS) 2022-23. And what the farmers are getting for their wheat crop is almost 50 per cent more than the MSP.

Millions of wheat farmers across India are pleasantly surprised at this high rate for their wheat crop, which is at present being procured by traders and agricultural mandis. This sudden jump in the wheat prices, inform the sector experts, is due to the war being fought between Ukraine and Russia over 5,000 kilometres away. Farmers like Songra are receiving unprecedented prices for selling their wheat crop across the country.

As per the Food and Agriculture Organization (FAO), Russia is the world's biggest exporter of wheat. While it is facing a slew of economic sanctions imposed by the West for invading Ukraine, countries abiding by the sanctions are now scrambling to arrange for the much needed essential supplies from elsewhere. Also, Ukraine's supply of wheat for the countries in west Asia is disrupted due to the war.

This has led to an increase in demand from other major wheat exporting countries including India.

As a direct result of the surge in the global demand for wheat, farmers in India who otherwise face a chronic crisis of lower than government-approved prices are now getting unprecedented rates for their produce. At some of the mandis (wholesale markets) in the country, wheat is being sold at Rs 3,000 per quintal (100 kilogramme), way above the MSP.

War, Ramzan and wheat shortage in West Asia

A Delhi-based commodity expert informed Gaon Connection on the condition of anonymity that it is likely that Indian export of wheat can rise to an historic high this year.

"Before the start of the Russian invasion of Ukraine, the price of Indian wheat in the global market was hovering around $300-$310 per tonne (1,000 kilogrammes). It has risen to $360 in the last 15 days. It is likely to shoot to $400 in a few days which translates as Rs 2,800 in Indian currency," he told Gaon Connection.

The expert pointed out that the present situation is favourable both for India's foreign reserves as well as the Indian farmer.

"There is a surge in demand for wheat in countries of west Asia such as Turkey, Syria, Oman, Lebanon and Saudi Arabia. Also, the variety of wheat found in India matches that of Ukraine. Ukraine is yet another major producer and exporter of wheat," he said.

According to him, the ramzan is fast approaching and these countries are keeping their stocks ready to meet the festive season demand.

The global surge in wheat demand is benefitting farmers like Songra. The wheat grown by Ratlam-based Songra's agrarian family belongs to the lokvan variety and qualifies to be of the export quality.

"Since my wheat is of export quality, I get a slightly higher price than the regular wheat but this year's prices are unprecedented. Last year I received the highest price of Rs 2,500 per quintal. That was the peak rate. But this year, the bid has just begun and the prices are already touching Rs 3,000," he added.

High hopes but uncertainty prevails

Meanwhile, commenting on the long-term possibility of the wheat prices remaining on the higher side, Ajay Goyal, a Pune-based functionary of the Flour Mill Federation told Gaon Connection that although the present market prices are favourable to the Indian farmers but the situation can possibly change after the harvest of the rabi (winter) crop.

"Exporters are keen to buy wheat from the farmers as the global demand is high. They are ready to buy it at a minimum price of Rs 2,500 per quintal. But since the harvest season has just begun, it is hard to comment on the long-term market scenario," Goyal told Gaon Connection.

Also, an exporter told Gaon Connection on the condition of anonymity that the high price of wheat in the wholesale markets can soon result in food inflation in the country.

"A lot will depend on the government's stand on the situation. A byproduct of these high wholesale prices is that it will soon start impacting the consumer markets which will cause food prices to rise across the country," the exporter said.

"It's not as if all wheat will be exported, the government also has to maintain its stock for the PDS (public distribution system). We expect the Union government to come up with a decision on the wheat exports in the coming days," he added.

Balancing between exports and domestic demand

It is important to note that the Union government cannot allow a free flow of wheat exports from the country as it is a staple crop and is vital to India's food security.

A former member of the New Delhi-based Roller Flour Millers Federation of India told Gaon Connection that it is too early to assess the situation as the new harvest has just started arriving in the market.

"A lot of factors can disrupt the market. Unseasonal rainfall, heat waves and other weather conditions can hamper the wheat harvest in the country. Even a rise by a degree celsius in the summer temperature can affect the grain production," Veena Verma said.

Owing to the outbreak of the COVID-19 pandemic in the country, the central government has been providing free of cost food rations to the poorest sections of the population. Even so, the stocks of foodgrains in the country's storages (Food Corporation of India) are full.

According to the Union Ministry of Consumer Affairs, Food and Public Distribution, as on February 16, 2022, a total of 26 million tonnes of wheat is stored in India's grain reserves whereas the stipulated requirement until April 1 is 7.5 million tonnes which means the present stocks are almost three times higher than the requirement set by the government.

"The export of wheat recorded a huge surge at USD 1,742 million during April-January 2021-22, growing 387 per cent over the corresponding period in 2020-21 when it touched USD 358 million, while other cereals registered a growth of 66 per cent by fetching USD 869 million during April-January 2021-22 over the corresponding period in 2020-21 when it touched USD 527 million," the Union Ministry of Commerce and Industry stated in its recent press release on March 7.

Translated and rewritten by Pratyaksh Srivastava. Read the article in Hindi here.