A profiteering tool?

Pope Francis recently made a strong plea against the use of grain as "a weapon of war", as the continuing Russia-Ukraine war is feared to cause a global food crisis. "Of great concern is the blockade of grain exports from Ukraine, on which the lives of millions of people depend, especially in the poorest countries," Francis said at his weekly address in the Vatican on June 1. "Please do not use wheat, a staple food, as a weapon of war!" he said, adding that every effort should be made to "guarantee the universal right to food". Russia and Ukraine produce around 30 per cent of the global wheat supply. India, which banned wheat export last month, is the third-largest supplier after them. The nations of Africa and the Middle East are the worst hit. Russian President Vladimir Putin last week offered "to make a significant contribution to overcoming the food crisis through the export of grain and fertilizer on the condition that politically motivated restrictions imposed by the West are lifted". But the offer was rejected by the US and the EU.

On May 13, India announced a ban on its wheat exports to counter domestic food prices. This decision was taken even as the prices in the international market spiked exponentially with the war in Ukraine. The Indian government naturally drew backlash from the international community, particularly the G7 group of developed countries, for its action. Within three days, the government announced 'some relaxation' to the order issued by the Directorate General of Foreign Trade (DGFT) on restricting wheat exports. It announced that wherever wheat consignments that have been handed over to the Customs for examination and registered into their systems on or before May 13, would be allowed to be exported. In the next few days, the government set up a committee to take decisions on requests from some nations about their dire need for wheat. Officials said five to six countries had evinced interest in importing Indian wheat since the ban on the export of the cereal on May 13. Earlier this week, the government allowed total wheat shipments of 469,202 tonnes. These shipments were moved mainly to Bangladesh, the Philippines, Tanzania, Egypt and Malaysia. It must be noted that Indian foodgrain exports and imports are carried out completely by private dealers and not by government entities.

Even after the partial opening up of the restrictions, at least 1.7 million tonnes of wheat remain piled up at various ports, media reports quoting private dealers running global trading firms have said. Kandla and Mundra ports have the maximum stocks. The dealers said the government needed to issue export permits for at least this load of stocked up wheat, as it could rot in the ensuing monsoon. Moving the wheat back out of the ports into the interior towns for domestic consumption was unfeasible as it would entail additional costs due to loading and transportation fees. So, if these stocks get damaged by rains, no purpose will be served and the government itself would suffer major losses, the dealers said. The stocks piled up because the exporters had moved large quantities to the ports before the ban was imposed, as the government was then encouraging them to replace the grain supplies lost due to the war in Ukraine, they said.

Meanwhile, frantic efforts are being made by the United Nations as well as the African Union to pressure Russia into releasing its grain and fertilizer stocks, along with those of Ukraine stocked up in the Odessa port and elsewhere. But, in return, Moscow has been insisting on the lifting of sanctions by the US and the European countries. Russia says the sanctions have affected their exports to access vessels and caused impediments to countries importing from them. President Putin on Friday blamed the West for emerging global food and energy crises and repeated his government's offers of safe passage for ships exporting grain from Ukraine if mines are removed from the waters. Regardless of the situation, he also announced plans to increase wheat exports to 87 million tonnes between June and July to counter the wheat crisis. The UN has proposed to release Russia and Belarus from sanctions on their fertilizer exports if Moscow unblocked Ukraine's grain exports through the Black Sea. UN secretary-general Antonio Guterres also mentioned that the UN urged the West and Russia to show "goodwill on all sides" to control the global food crisis. The African Union also plans to initiate discussions with Putin and the Ukrainian leadership to resolve the crisis.

Coupled with the situation created by the Russia-Ukraine war, the Indian government's ban on wheat exports has also accentuated the global food shortage and steeply driven up food prices. Domestic food grain prices have already shot up in the past few months. Ironically, India imposed the ban just two days after it announced that it was eyeing a record increase in wheat shipments this year. The government also restricted sugar exports to stabilize prices and ensure supply. India is the second-largest exporter of sugar in the world. Before the wheat export ban, India had set a goal of shipping a mammoth 10 million tons this year, looking to capitalize on the global disruptions to wheat supplies from the Ukraine war and to find new markets for its wheat in Europe, Africa and Asia. The reasons given for imposing the prohibition were the severe heat wave and rising domestic prices. Wheat grains usually ripen around this period, which is why they are extra sensitive to heat. Wheat production in India is expected to be lower this year than the earlier estimates due to such inclement weather. In February, the government had estimated 111 million tonnes of wheat production. However, the extremely hot conditions in late March affected the yield and the revised estimates stand at 105-106 million tonnes. This has also given rise to speculation that wheat production over the next few years would continue to remain affected as extreme weather conditions are likely to become the norm.

In the coming months, this shortage of wheat could affect the public distribution system seriously. It could hit the wheat prices in the open market. If the export market is subjected to volatility, the held over wheat brought at higher prices by traders could be routed back to the domestic open market at higher prices. People already deprived of wheat in their ration quotas would then be forced to buy the high priced wheat from open markets. Farmers could also get affected if the volatile export market does not materialise fully. Government procurement, which has already been slashed, will close later this month and hence the farmers will have to undertake distress selling of the wheat at whatever price they get from the high profit-seeking traders. Private traders control imports, exports and prices of wheat, rice, cereals, sugar and edible oils no matter which government or political party is in power. In short, the immediate future portends all kinds of pitfalls and dangers which could deal a devastating blow to the already distressed lives of the people.

Experts expect that the wheat export ban will be lifted or softened soon, as, within a week after the prohibition, wheat prices have started to slide, though not significantly. This price decline indicates how traders control the agri-market. Price movements in the domestic wheat market would also be determined by the trend of the ensuing southwest monsoon. However, much would depend on the manipulative ability of the private traders who control imports, exports and prices of essential food grains like wheat, rice, cereals, sugar and edible oils, no matter which government or political party is in power.

Views expressed are personal