With the hike in prices of almost every commodity, it was only a matter of time that wheat products too got costlier as a result of the ongoing Russia-Ukraine war. The Russia-Ukraine war has resulted in halt of exports of wheat from Russia; this has given a push to India to take this opportunity, as the country is the second largest wheat producer in the world. The catch here is if India goes ambitious on this front, there can be a scarcity in domestic supplies in the coming months, which may lead to further price inflation in wheat products.

“While India is very well positioned in terms of wheat since we have surplus and have fantastic crops this year too, our wheat was not in demand as much as Ukraine. However, with the war situation India’s wheat demand has increased drastically leading to its price increase by around 10-15 per cent. Subsequently, this is leading to a costlier wheat related products the prices of which are going up by 10-12 per cent,” said Krishnarao Buddha, Senior Category Head, Parle Products. Parle offers a range of bakery products that has wheat as the main ingredient.

Wheat prices up by about 20 per cent

“We can see an upward trend in price and from the last 10 days, prices of wheat-related products have gone up by 20 per cent. Export demand will,” said Angshu Mallick, Managing Director & CEO, Adani Wilmar.

Not just bakery, India largely depends on wheat for daily household consumption, bakery items and even breweries. “The Russia-Ukraine crisis has led to a rise of 15-20 per cent on the wheat prices within a month and this has impacted wheat-related products in the country,” said Ashish Khandelwal, Managing Director, BL Agro.

Read More: India’s household expenses may shoot up due to Russia-Ukraine war; companies watching input costs

Why export of Indian wheat has suddenly turned viable

According to a Reuters report, the global wheat prices have risen to a 14-year high due to supply disruptions from the Black Sea region, while Indian warehouses are brimming with wheat after five consecutive record harvests. India, for the last few years, has had a wheat surplus but the country has struggled to export more due to the annual increase in support or guaranteed prices offered by the government to growers which makes Indian wheat more expensive than world prices. However, the combination of factors like high global wheat prices, low rupee and surge in demand from traders seeking to tap on the opportunity in hand, has made Indian wheat attractive.

How much global wheat India can supply

Union food secretary Sudhanshu Pandey had said by February-end, export of the key foodgrain stood at 66 lakh tonnes, which is higher than that of the previous best of 65 lakh tonnes in 2013-14. This may touch 70 lakh tonnes by March-end. “India’s wheat exports will benefit from the supply shortages caused due to the Russia-Ukraine war. But India’s share of total global wheat exports is less than 1 per cent and there are limits to how much this can be raised given the large domestic requirement,” said Priyanka Kishore, Head of India and SEA Economics, Oxford Economics.

How will a surplus export impact domestic prices and demand?

India has signed contracts to export about 500,000 tonnes of wheat in recent days, trying to cash in on a sharp rally in international prices. “As India is the only country with ample availability of wheat, surely its prices will move upwards on the account of export opportunities to major Middle East and Asian countries. Export demand will be continued and so wheat prices are looking bullish. Indian consumers will have to bear a minimum of 15-20 per cent higher cost of wheat products,” said Angshu Mallick.

The exports are expected to further increase the prices in the next few months. “New crop will come by April first week and while the traders can look at exporting right now for better prices, ultimately there will be an impact of this during the end of the year. If we sell in surplus, we will have to face scarcity in the next season. If this continues, there can be a further price hike in wheat prices by around 20 per cent in the next 6-8 months,” said Ashish Khandelwal. Krishnarao Buddha too maintained that the impact of this will be ‘immediate’ and will be seen as ‘further price hike around May-June quarter’.

Export wheat at international prices, or use in India at MSP?

Furthermore, with the prices of wheat going up and exports increasing, government procurement, which begins in April, will also receive a slow response in many states as market prices currently are above MSP and a likely ban or export restriction can be expected in the coming days, said industry players. For July 2021-June 2022 period, the government had last year hiked the MSP for wheat by Rs 40 to Rs 2,015 per quintal. “If export volume increases drastically then the government may impose export duty rather than sudden ban and they will review further action based on domestic demand and supply,” said Angshu Mallick.