Wheat Export Ban: Extreme heat wave in India is affecting the world

(This story was originally published May 16, 2022)

New Delhi: In a surprise move, the government has banned wheat exports, pushing prices to new record highs.

Extreme heat waves in most parts of the country have reduced the likelihood of harvesting, the announcement marks a U-turn in a government policy.

The ban is also being seen as a measure to control internal inflation. Retail inflation rose to an eight-year high of 7.69 percent in April on rising food and fuel prices.

A few days ago, the center said it was still targeting a record 10 million tons of exports that would help compensate for the supply shortfall in Ukraine. Recently, a statement from the Ministry of Commerce said that India would send trade delegations to nine countries – Morocco, Tunisia, Indonesia, Philippines, Thailand, Vietnam, Turkey, Algeria and Lebanon – to explore the possibilities of increasing wheat shipments.

The ongoing war between Russia and Ukraine, the main exporters of food grains, has led to a ban on exports amid disruptions in global wheat supplies. India’s move threatens to further reduce global wheat supplies.

However, existing export sales will be allowed under the Credit and Government-to-Government Agreement to meet food security requirements.

As a result of the sanctions, U.S. and European wheat futures have risen nearly 6 percent, the Chicago market – a global benchmark – has previously reached its daily trading limits and Paris prices have reached all-time highs.

Ripple effect

In other words, India’s heat flux is having a huge impact on the world’s food supply.

Wheat prices have risen more than 70 percent this year due to Russia’s aggression in Ukraine. India’s announcement drew sharp criticism from a meeting of agriculture ministers from seven industrialized nations in Germany, who said such measures would “exacerbate the crisis” of rising commodity prices.

“If everyone starts imposing export bans or closing markets, it will only make the crisis worse,” German Agriculture Minister Sam Ozdemi told a news conference in Stuttgart.

Global buyers were banking on supply from India, the world’s second-largest wheat producer, after exports from the Black Sea region declined following Russia’s invasion of Ukraine in mid-February.

Prior to the embargo, India had set a target of shipping 10 million tonnes this year. However, at least 10 to 15 percent of the wheat crop in the north, the most productive region of the country, has been destroyed, due to extreme heat conditions that overtake the tree and prevent it from producing any grain.

Last month, Prime Minister Narendra Modi told US President Joe Biden that India could take steps to reduce the global deficit as a result of Russia’s invasion of Ukraine. These two countries account for about one third of global wheat exports.

The United Nations Food and Agriculture Organization has warned that an additional 8 million to 13 million people could be malnourished by the conflict next year.

Heat flow hurts production

India’s wheat exports reached 8.7 million tonnes in the fiscal year ended March, with the government forecasting record production in 2022 – about 122 million tonnes.

In February, the government forecast production of 111.32 million tons, the sixth record crop, but it cut the forecast to 105 million tons in May because of the rise in temperature in mid-March, which could be around 100 million tons or even more. Low

Bloomberg (44)

The heat wave has hit wheat-producing areas particularly hard, with temperatures reaching 44 degrees in Punjab and 42 degrees in Uttar Pradesh this week.

Adding to India’s heatwave concerns is that it now has to import coal to meet its energy and energy needs, which again, thanks to the war in Russia, are pushing coal prices through the roof.

Extreme weather events such as floods and heat waves will become increasingly common and devastating as average global temperatures rise.

In fact, a study found that rising temperatures between 1981 and 2019 reduced the yield of some Indian crops by 5.3 percent. The result of climate inactivity over the next half-century, according to Deloitte, would be an economic loss of $ 35 trillion. Current price terms, which represents 12.5 per cent of India’s GDP in 2070 alone.

Evergrand Crisis (5)

The Deloitte report predicts that uncontrolled climate change will turn the story of India’s economic growth into a fall. This would jeopardize India’s position as a modern, global manufacturer and service-oriented economy.

“Uncontrolled climate change threatens India’s contemporary economic engine, leaving 80 per cent of GDP at risk. Services, manufacturing, retail and tourism, construction and transportation will suffer the most climate-related damage in the next 50 years, and by 2070, average experience will be ৷ per year. Adding more than $ 1.5 trillion to GDP is an annual loss, “the report said.

“Unless significant steps are taken, climate change will reduce India’s economic potential by an average of 5.5 percent over the next 50 years. As temperatures continue to rise, losses will increase exponentially. This is stated in the report titled ‘India’s turning point’.

Another report in the medical journal The Lancet shows that India’s risk of extreme heat increased by 15 per cent between 1990 and 2019, and that India is among the top five countries with the highest exposure to heat by vulnerable people, such as the elderly and the poor. . It and Brazil have the highest thermal death rates in the world and farm workers are the most at risk.

Poor agricultural production also led to a decline in farmers’ incomes, and as fertilizer and fuel costs increased, so did margins. One option is to sow wheat early as the intensity and frequency of hot weather will increase in the coming years.

March recorded an average temperature of 33.1 degrees Celsius (91.6 degrees Fahrenheit) in India, the highest ever. In April, temperatures rose to 46 degrees Celsius in some places. There is no possibility of getting any vacation in the coming days.

Challenges for peasant workers

Puneet Singh Thind, a farmer from Punjab, told Bloomberg News that his 18-acre farm had lost 40 percent of its yield compared to the normal season, mainly due to heavy rains in the east and heatwave conditions in March. He had to incur extra costs to deal with erratic weather, such as draining excess water from the field.

Extreme heat has also led to loss of working hours: According to a December 2021 survey published in the journal Nature, India would lose 100 billion working hours each year if such heat waves continued.

Associated with multiple health effects, including premature death from workers’ heat exposure; Workplace injuries; Illness from heat-related illness; And acute kidney damage.

Indeed, heat exposure is a potential contributing factor to the epidemic of chronic kidney disease of unknown etiology to healthy, relatively young workers in Central America, Sri Lanka, India and Egypt and other parts of the world. He added that exposure to heat can increase the absorption of certain chemicals and is associated with adverse pregnancy and mental health conditions.

The country has already lost about 259 billion hours of labor annually between 2001 and 2020 due to the effects of humid heat, according to a study by researchers at Duke University. The cost to India during this productive period was $ 624 billion (Rs 46 lakh crore) – equivalent to about 7% of the Gross Domestic Product (GDP) of 2017. 24-Jan-2022.

The effect of the ban

According to a Reuters report, about 1.8 million tonnes of grain is stuck in ports due to the wheat export ban, which has caused heavy losses to traders due to the possibility of selling in weak domestic markets.

While export or payment guarantees backed by LCs issued before May 13 may go ahead, traders currently have LCs of only 400,000 tonnes out of about 2.2 million tonnes of wheat in port or transit, said a Mumbai-based dealer, a global trading firm.

“The impact of the wheat export ban on India’s domestic food inflation is likely to be muted. This export ban is an advance step and could significantly curb the rise in local wheat prices; However, domestic wheat production is probably limited due to heat flux, while local wheat prices may not be materially moderate. If India’s wheat ban leads to higher prices for alternatives like rice, there could be upward pressure on other food prices, ”Nomura said in a note.

Trade experts also believe that the ban will cool the market price of wheat which has exceeded the Minimum Support Price (MSP) in recent months. Wheat was procured at higher rates of MSP by private players which increased the market price of wheat as farmers preferred to sell their wheat in the open market. Private traders will now be forced to release stocks that were expected to rise further.

(With input from Bloomberg and Reuters)

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