Trade, import and export for MSMEs: The global surge in wheat prices triggered by the Russia-Ukraine war has opened up a window of opportunity for not just large Indian players but also small exporters as well. That’s because India is the second-largest wheat producer in the world after China. The country’s wheat harvest is expected to rise to a record 110 million metric tonnes (mt) in the crop year 2021-22 (July-June), from 108 million mt a year ago, according to an S&P Global Platts survey published in February. 

With the record output in wheat production, players in the MSME-dominated wheat export market are looking to maximise supply with a steep rise in demand from countries in South Asia, the Middle East, Africa, and others that depended on Ukraine and Russia until the war broke out in February. The two countries reportedly catered to around 25 per cent of the global wheat trade which was estimated to be 194 million mt for 2021-22, according to the International Grains Council. 

Ahmedabad-based Eco Export, for instance, is witnessing an increase in requirement for wheat and wheat-related products including durum wheat and milled wheat from 500-2,000 tonnes per customer enquiry before the war to 1-2 lakh tonnes in post-war enquiries. The flow of enquiries at Eco Export has also jumped over 3X from around 20-30 per week before the war to around 100 currently, according to Founder and CEO Hardik Nathavani. The company has outsourced production to farmers in Gujarat, Rajasthan, and Madhya Pradesh while it also procures produce from multiple mandis in these states.

“The growth in demand is huge currently, particularly for durum wheat and milled wheat in our case from buyers in the Middle East, Europe, Africa, and Bangladesh,” said Nathavani. Eco Exports generally exports around 100 containers (20 ft) of wheat products annually. However, with the current demand, the company is expecting to double it to around 200 containers in the new financial year.

The timing has also been apt for exporters like Nathavani. The winter wheat usually sown during the October-December period is harvested from February onwards and arrives in the market for export by mid-March. In comparison, wheat supplied by Ukraine and Russia matures in August and September. This coupled with the current war crisis had pushed global prices of wheat. According to Sudhanshu Pandey, Secretary, Department of Food & Public Distribution, global wheat prices were in the range of Rs 24,000-25,000 per tonne.  

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At a virtual press conference on the Open Market Sale Scheme of foodgrains earlier this month, Pandey said India’s wheat exports had touched 6.6 million tonnes by the end of February and are expected to hit around 7 million tonnes by March-end. The fresh crop at a significantly competitive price, for instance around Rs 2,500 per quintal at Gujarat’s Mundra port, according to Nathavani, has given room for domestic exporters to reprieve the world from the challenge of poor wheat supply.

“As the season with new crop has just started, we are warming up to fulfil the orders received as even if the war ends by let’s say next month, it would take much longer for the global wheat export market to normalise. One of the reasons is also the payments issue particularly from Russia amid sanctions. No major economies would be dealing with the two countries for some time ahead,” said Nathavani.

However, the jump in freight rates particularly to Europe due to the disruption caused in the shipping network amid the container logjam issue post Covid might dampen the export potential of at least small exporters like Nathavani who operate on limited financial bandwidth. “My present market has been Oman and Saudi Arabia. The freight rates to Europe have jumped from earlier Rs 1.5-1.9 lakh per container to around Rs 4.5 lakh or above. Hence, sending containers to Europe is not cheap in comparison to shipping to Dubai that costs Rs 75,000 upwards,” he added. 

Despite the volatility, Nathavani is targetting to achieve 20-30 per cent turnover growth in FY23 from around Rs 20 crore currently on the back of export opportunity. Along with the turnover, the number of clients is also expected to scale up to 25 from 20 so far which Nathavani said is significant for the eight-year-old firm in food grain exports. The company is also looking to increase its network in the three states from the current over 20 mandis along with accessing bank credit to ramp up supply for exports.