Are we staring at a global food crisis?

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The peak arrival period of wheat in APMC markets in Punjab and Haryana ends by April 30. Ground reports suggest that the procurement may reach just about 250-lakh tonnes. Last year the procurement was at an all-time high at 433-lakh tonnes. If the Union government releases 100-lakh tonnes of wheat under the Open Market Sale Scheme (OMSS) primarily to cool down the market prices, the central pool stock of wheat on April 1, 2023 may be lower than the buffer norm. We projected various scenarios of wheat in the central pool, and it appears that procurement may only reach about 250-lakh tonnes — which is our worst-case scenario.

One reason for lower procurement this year is the private buying for export. The more important reason, however, is the loss of production due to excessive heat in March. Wheat production may fall well short of the government's estimate of 111 million tonnes; it could be lower than 100 million tonnes.

In addition to private buying for export, the likelihood of price rise may also be persuading the traders to stock wheat. Some big farmers may also be withholding stocks in anticipation of higher prices in the open market later in the year.

Reports in the media suggest that the World Trade Organization (WTO) is looking into objections over India’s export of wheat. However, it is not clear if any country has objected to the export of wheat bought by the trade from the open market.

In May 2018, the United States submitted a communication to WTO in which it pointed out that the support provided by the Indian government for wheat and rice through procurement at the MSP, is much higher than what is permitted under WTO commitments. However, India has not agreed with the calculations of such support submitted by the US in this communication, and the matter rests there. The US did not take India to the dispute panel at the WTO.

As of now, there is no indication that the Union government is considering export of wheat from central pool stocks as it would have already realised that it will not have the surplus in 2022-23 in the central pool to consider wheat export. Therefore, India’s wheat exports by private trade (which is buying from the open market) is not in violation of the Bali Ministerial Decision of 2013 on stocks held by the government.

India’s wheat exports will provide some succour to countries who have traditionally depended on Russia and Ukraine. Several West Asian and North African countries are badly hit due to depletion in global supplies. They would be paying a much higher price than previously for importing wheat from the European Union or the US. A few days back, the Odessa port in the south of Ukraine came under Russian attack. If this port falls to Russia, Ukraine will not be able to use it for the export of wheat. This will affect global supplies even after the war has ended.

Russia attacked Ukraine on February 24 and this war is already two months old, with no end in sight. Quoting the FAO, the UN has warned that “it was uncertain that Ukraine could harvest crops, plant new ones or sustain livestock production”. It means that the global market of wheat will continue to experience shortages for months, and the disruption may take years to normalise.

In this situation every country would like to buy and store wheat as well as other food items which will put further pressure on supplies and prices.

In March, the FAO’s vegetable oil price index rose by 23.2 percent. The Russian war had already affected the supply of sunflower oil from Ukraine. From April 28, Indonesia will not export processed palm oil. It means that Indians will have to pay more for edible oils. In the meantime, use of palm oil for bio-diesel continues unabated in the EU.

The Russian attack on Ukraine and the global food crisis emerging from it should warn us that use of food items for bio-diesel and ethanol (from grains) for blending of petrol is not desirable, especially for India, whose surpluses of agricultural produce are only marginal.

Siraj Hussain is former Union Agriculture Secretary and co-promoter of Arcus Policy Research. Shweta Saini is an independent researcher. Views are personal, and do not represent the stand of this publication.