India’s sudden ban on wheat exports likely to hurt farmers

INDIA—Citing food security, India’s ban on wheat exports will likely hurt farmers and traders who have stockpiled the grain in anticipation of higher prices in the coming weeks.

The sudden decision comes on the heels of an expected sharp fall in government wheat stocks.

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The impact of which, is already being seen in wheat wholesale markets which have seen a fall of USD 0.65-1.29 per quintal on average since the ban was implemented.

Therefore, farmers across the major wheat-producing states have been stocking their harvest and bringing it in instalments in the hope that wheat prices will keep on increasing in the coming days.

At the same time, farmers stayed away from government procurement this time as they were getting high prices in private trade.

Wheat prices in the private market have been ruling much above the MSP (minimum support price) of USD26.01 per quintal.

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Thus, procurement fell to a 15-year-low. In the 2022-23 marketing season only 18 million tons of wheat have been bought so far against 43.3 million tons in 2021-22.

Experts said the government must have realized that the production was much below than what it had estimated earlier. But the sudden move may result in panic buying, thus leading to a fall in prices for farmers.

“There was an expectation of a MEP (minimum export price below which shipments cannot happen) or a tariff and not a complete ban on private export. This may hurt farmers who have stocked their wheat crop and were hoping to reap gains from higher prices,” Shweta Saini, senior fellow, Indian Council for Research on International Economic Relations, said.

Farmers may now be forced to sell to government procurement agencies at MSP, much below than what they were getting currently. Experts say the market reaction to the price situation will be clear in a few days.

Siraj Chaudhry, managing director and chief executive of National Commodities Management Services, a warehousing and trading company, maintains the ban is not the best course of action to manage the situation.

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Saying that an approach with measures such as a minimum export price and quantitative restrictions would have been better as a sudden ban throws challenges to trade, affects Indian exporters’ reliability and hits the earning potential of farmers.

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