The conflict in Ukraine has raised concerns about supply disruptions from the Black Sea region, which accounts for 30% of world wheat exports. That pushed global wheat prices to a 14-year high this week.

Currently the only major wheat supplier

India is currently the world’s only major wheat supplier thanks to a large surplus of reserves in the country. The rebound in global prices and the Indian rupee’s record decline against the dollar are also making wheat shipments attractive to Indian sellers.

India’s warehouses are crammed with wheat after five record harvests in a row – largely due to favorable weather, the introduction of high-yielding seeds and support for state-set prices for growers.

The wheat harvest is set to hit another new peak in 2022, with production expected to reach 111.32 million tons from next month, up from 109.59 million last year.

Overfilling of grain bins forced the Food Corporation of India – a government-backed grain stocks agency – to store wheat in makeshift warehouses.

Wheat inventories in state warehouses totaled 28.27 million tons, compared to the target of just 13.8 million tons. With another good harvest starting in April, the granaries will be full by May and June.

Why didn’t India previously export much of its surplus wheat?

Overflowing wheat stocks helped the government weather droughts in 2014 and 2015 and enabled Prime Minister Narendra Modi’s government to distribute grains for free during the coronavirus containment period.

But economists say such inefficient cultivation of such large quantities of wheat has unnecessarily stretched government finances, and monocultures also deplete nutrients from the soil.

India is struggling to export wheat as the subsidized or guaranteed prices offered to growers by the government have increased year on year. This increase makes Indian wheat more expensive than world prices, resulting in uneconomical sales abroad.

But the rare convergence of factors such as multi-year high global wheat prices, record-low rupees and rising demand from traders looking to replace Russian and Ukrainian wheat with Indian made Indian wheat so attractive.

advantages and challenges

Strong demand from Asian customers such as Nepal, Bangladesh, Sri Lanka, Indonesia and the Philippines allows India to ship wheat at lower freight rates. India can also ship wheat to the Middle East with lower shipping costs than many other sellers.

Additionally, India was able to allay concerns about the quality of its wheat late in the year when Indian scientists developed many high-protein varieties suitable for making pasta and pizza dough.

Indian traders and government officials cite increasing cargo-handling capacity at Indian ports as further help.

But traders said rising internal freight costs to move grain from major wheat-producing states to ports and a potential shortage of railcars could hamper exports.