grain harvester combine work in field

A few weeks ago, we wrote that the world will need to re-imagine trade flow routes in order to keep the world fed. While Russian wheat is flowing freely and the massive Australian crop is flying out the export door, the disruption to Ukraine’s export pathways - not to men-tion the ability to get the best out of this season’s crop - is putting immense pressure on supply.

Food security is becoming one of the worlds single most important issues.  We are seeing civil unrest become more prevalent around the world as the price of living (inflation) pushes some countries to the brink of anarchy. The cost of living is causing riots in Sri Lanka, demonstrations against Gov’ts in South America, and protests in the Middle East and North Africa.  In order to bring stability, Governments are having to start thinking outside the box.

Enter India.  Exports of Indian wheat are not uncommon, but they are not widely regarded as a major exporter either.  Food security and phytosanitary concerns are the main reasons why Indian exports do not feature more regularly.  The country is in fact the world’s second largest producer of wheat (after China), averaging around 110mmt per annum, yet only accounts for 1% of global trade.  After a couple of good production years, state reserves are believed to be around 100mmt, leaving room for additional exports.

The surge in global wheat prices due to the Ukrainian conflict, has now pushed Indian wheat prices above the MSP (Minimum Support Price) making exports more lucrative.

India has said it can export between 7-12mmt of wheat.  While quality is relatively poor, it is cheap, trending around $100/t less than Aussie, US and European origins.  Probably the biggest barrier is phytosanitary concerns around the presence of fungal disease Karnal Bunt, which makes wheat unsuitable for human consumption.  In a clear sign that countries are willing to take the risk, Egypt has recently signed an import agreement with India and promptly purchased 350kmt of wheat.  SE Asian buyers are also looking at whether a deal can be made to supplement high priced grain from Australia.

The Indian wheat harvest will start later this month.  There is some conjecture that its stated aims of supplying in excess of 10mmt is slightly ambitious and may in fact leave India facing a shortfall, especially if this seasons harvest is below par.  Fertiliser shortages and extreme heat recently may have curbed yield potential and some analysts are urging caution before opening the export flood gates. If history is anything to go by, we haven’t seen India exporting more than 7mmt for over 30 years + (figure 2) according to the Food & Agriulture Organisation FAO. 

What does it mean?

The emergence of India as a wheat supplier will be welcomed by food insecure nations who have previously relied on Black Sea supplies.  However, if the war in Ukraine drags on, or indeed spreads, the inability to secure fertiliser for next season’s crops and already disrupted trade routes could cause a much bigger issue.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • Food security issues causing civil unrest around the globe. 
  • India is the 2nd largest wheat producer in the world, but account for only 1% of global wheat trade.
  • India suggest it can fill some of the grain gap, although some analysts urge caution.

Click on figure to expand

*contains some years labeled as unofficial figures in FAO datasets.

Data sources: Bloomberg, FAO, Reuters, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Jack tours Russia

To start the week, the wheat market got a very nice little push courtesy of Russian frosts, a bullish USDA report and technical short covering.

Read More »
Wheat plants _ image
Grains & Oilseeds

Benign May WASDE

It’s May and the new season World Agricultural Supply and Demand Estimates (WASDE) from the United States Department of Agriculture (USDA) is out. The WASDE

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.