India’s domestic wheat prices rising, despite reports of record harvest

Domestic wheat prices in India continue to climb higher, driven by a vastly higher official export target and a constant stream of import queries from countries looking for an alternate source to Ukrainian or Russian wheat despite the likelihood of yet another bumper harvest. Over the last week, domestic wheat prices have gone up by 5-7 percent in the wholesale markets, and are now poised to catch up with already high export prices.

Reports of lower than anticipated yields in the major wheat-growing states of Punjab, Haryana and Uttar Pradesh have changed all production and export estimates. The latest rise has made the entire wheat supply chain — from farmers, traders and exporters to even the government — anxious after nearly two months of planning to capture global demand.

From geopolitical implications of promising wheat to an array of nations in the wake of the Ukraine crisis to inflationary worries at home, a bad harvest this year has wide implications.

Wheat exports from Ukraine, known as the breadbasket of Europe, stopped days after Russia invaded Ukraine on 24 February. This led to the stockpiling of the foodgrain in a large number of countries in Europe, North Africa, and the Middle East, which were dependent on Ukrainian wheat. Inclement weather in many wheat-growing parts of the world, high shipping rates and renegotiated contracts had already made wheat a valuable commodity in 2021.

Between April 2020 and December 2021, the price of wheat increased 80 per cent, according to data from the International Monetary Fund.  On 8 April, Russian wheat supplies to the global market were cut off after the country announced stockpiling. According to the United Nations Food and Agricultural Organisation, in 2019, after China (133.6 million tonnes) and India (103.6 million tonnes), Russia was the third-largest wheat producer globally (74.5 million tonnes), while Ukraine ranked seventh (28.4 million tonnes). However, large domestic demand ensures the majority of the crop is used to feed the local populace in India and China.

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