Wheat Crisis
Context
The Food and Agriculture Organization of the United Nations (FAO) noticed that Indian Wheat Exports had made a small as visible impact on global inflation.
Key points
- Global wheat prices rose nearly 50 per cent.
- Brazil's wheat exports are three times higher, Argentina increases its export of wheat and South American wheat exports to West Asian nations jumped over 400 per cent.
- These increased exports will not be enough to make up for the nearly 30 per cent of global exports hit by the Ukraine crisis.
India's role
- Due to Russia- Ukraine crisis, new markets in countries like Israel, Egypt, Tanzania and Mozambique have opened up for India.
- India has been eyeing deals with new export markets in European Union countries.
- The government lowered wheat production estimates by 5.7 per cent to 105 million tonnes from the projected 111.32 MT for the crop year ending June.
- The production is reduced due to warm weather conditions from March to April in key grain-producing states of Punjab, Haryana, Madhya Pradesh, and Uttar Pradesh.
- A large quantity of wheat was being bought by traders at a higher rate than the minimum support price.
- Farmers are holding some quantity of wheat, expecting higher prices for their products shortly.
- Wheat procurement is undertaken by the Food Corporation of India and other agencies at MSP to meet the requirements under welfare schemes like Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) introduced during the pandemic.
- As government wheat procurement has dipped, concerns are being raised about the stability of prices in the country and the availability of grain for internal consumption.
- Farmers will certainly benefit from the scenario as they are being offered a price above the MSP.
- The Trade relationship will stay even when the global crisis is over, the farmers will get about 10 to 15 per cent extra price as market prices are ruling above MSP.
- The Centre had estimated exports of 12 MT for 2022-23, to cash the market rally in global wheat prices following the Ukraine crisis.
Inflation
- If private traders continue to buy above MSP, eventually that could stock inflation.
- The FAO's food price index averaged 158.5 points, down 0.8 per cent from March.
- The Price index for April 2022 was 29.8 per cent higher than that of April 2021.
- The report said that wheat prices had increased by 2.3 per cent compared to March.
- Food prices remain close to their recent highs, reflecting constant market tightness and posing a challenge to global food security for the most vulnerable.
Conclusion
The government has dismissed concerns about prices and stocks, asserting that India is in a comfortable situation will the overall availability of grain expected to be higher than the minimum requirement for the next year.
