GRAIN BATTLES
A largely man-made global wheat crisis is snowballing into a global blame game and India is unfairly getting drawn into it. EPISODE #75
Dear Reader,
A very Happy Monday to you
For the last few weeks surging wheat prices have dominated global and local headlines. Internationally there is a shortage of the grain as supplies from Russia and Ukraine—the two big suppliers, who between them account for a little over a quarter of global exports—have dried up. In addition inclement weather conditions, including a heat wave in India, have led to output shortfalls in several countries.
The surge in global wheat prices is great news for farmers, but bad news for consumers. Worse this spurt in wheat prices is fuelling a dangerous inflation spiral undermining the nascent recovery. Bracing for the worst, about thirty countries, including India, have banned wheat exports, squeezing global supplies further.
India did a flip-flop. It first announced that it would export wheat to help bridge the deficit. And then rolled back the decision. Predictably, this action invited a lot of bad press, particularly from the Western block of nations.
This week I explore this face-off and try to unpack India’s stand and examine whether it is indeed guilty of irresponsibility. Do read and share your feedback.
This week’s cover picture is sourced from Unsplash and taken by Melissa Askew. Thank you Melissa.
A big shoutout to Atul, Niranjan, Vandana, Premasundaran and Aashish for your informed responses, kind appreciation and amplification of last week’s column. Gratitude also to all those who responded on Twitter and Linkedin.
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A WHEAT CRISIS
From November last year the world market for wheat has been bracing for a climate induced hiccup. In fact, some countries, like China, have been quietly building up domestic stocks.
However, the Russia-Ukraine conflict snowballed this routine challenge into a full blown global crisis—something that is, if analysts are to be believed, threatening famine in some parts of the world. This is because these two countries, between them, account for about 25-30% of global wheat exports.
Fearing the worst some 30 countries, including India, have banned wheat exports and have instead started shoring domestic stocks.
However the Indian action has been singled out for extra scrutiny. I suspect it is because India actually volunteered to step-up wheat exports and then walked back the decision within 48 hours. This flip-flop has invited global censure, especially from a section of the Western block of countries. And the lack of a coherent communication strategy on India’s part has only complicated matters.
The obvious question is whether indeed India has slipped up in its commitment as a responsible global player?
Frankly I don’t think so. Yes it is guilty of a flip-flop. The reality on the ground though is that given the quantum of Indian wheat exports its presence or absence from global markets should have been a non-event, at best a blip.
Blame Game
Yet the narrative continues to build that India has failed to live upto its role as a global citizen.
Last week the chief of the International Monetary Fund (IMF), Kristalina Georgieva, alluded to it in a media interaction at the just concluded Davos meetings of the World Economic Forum.
In an interview granted to NDTV, the English news channel, Georgieva gently chided India:
“I do have an appreciation for the fact that India needs to feed nearly 1.35 billion people and I do have appreciation for the heat wave that has reduced agricultural productivity.
But I would beg India to reconsider as soon as possible because the more countries step into export restrictions, the more others would be tempted to do so and we would end up as a global community less equipped to deal with the crisis.”
I am sharing the full clip of the interview below.
Earlier, BBC reported on 16 May that the meeting of agriculture ministers from the Group of Seven (G7) in Germany had rained on India. The German food and agriculture minister Cem Ozdemir said:
“If everyone starts to impose export restrictions or to close markets, that would worsen the crisis.”
They do have a point. If all exporting countries withdraw, wheat importing nations will face a catastrophe. As you will see shortly they are exaggerating India’s role, given its share in global exports.
Grain Facts
According to data published by the United States Department of Agriculture (USDA), as of last year, India was the world’s third largest exporter of wheat, while Russia and Ukraine were the first and third largest respectively—between them they account for little over a quarter of global exports.
However in terms of its share of global wheat exports India accounts for a mere 5%. Clearly rankings can deceive.
The crisis has been caused by Ukraine’s supplies getting blockaded by the Russians—who in turn has come under sanctions and hence unable to export its produce. This is over and above the fact that wheat production in has taken a hit in some countries because of adverse climate.
More importantly, till a year ago India did not even rank among the top 20 wheat exporting countries.
Data sourced from the Agri Exchange, the trade portal maintained by the government agency Agricultural and Processed Food Products Export Development Authority (APEDA), reveals that this is because India was barely a blip on the radar of wheat exports. It was only in 2020-21 that it became a significant entity in the global export business and broke into the top-10 countries.
It is interesting that everyone is looking at the same facts yet we are conjuring different narratives, which, by the way, is the definition of post-truth.
Post Truth
They say that a crisis brings out character (or the lack of it).
Two catastrophic back-to-event events have actually tested every country in the world. First was the once in a century covid-19 pandemic, which had dodgy origins in Wuhan, China, which quickly morphed from a health threat to a global economic crisis.
Second, the Russia-Ukraine war, which has not only caused untoward (and avoidable) human casualties, has roiled global commodity markets. Together with the supply chain disruptions caused by the pandemic, it is wreaking havoc on the global economy—in fact some countries are facing the prospect of a recession.
The developed world has reacted to both shocks, if I may say, rather selfishly. In the first instance they started preempting global production of covid-19 vaccines. In fact far in excess of potential needs of their respective population. They left the developing and under-developed countries with limited health capacity and resources to fend for themselves.
India which launched its own production of vaccines, came under scrutiny, from these very developed countries, when it decided to temporarily walk back its commitment to exports to shore up domestic supplies. (Another matter that the Indian jab story has been a remarkable success, especially its deployment of an open source tech backbone to administer jabs to 1.2 billion people.)
At the same time, China was cut slack by the World Health Organisation (WHO) for its errors of omissions in alerting the world in time about the pandemic. Worse the WHO, almost immediately, signed off on a Chinese jab (the ongoing wave in China is questioning the efficacy of this vaccine) while dragging its feet on other requests, including by India.
Similarly, the Russia-Ukraine war has once again brought out the worst in the developed world. The conflict, like I mentioned earlier, has triggered a spike in global commodity prices. In the case of wheat it is also threatening an epidemic of hunger. And once again, the effort among the developed nations is to shore domestic stocks by drawing on every available supply source.
In short the blame game is misplaced. Instead the developed world should shine the light on themselves, especially their role in rendering multilateral institutions like the World Trade Organisation ineffective.
They have (like China) indulged in institutional capture of global multilateral institutions, undermining their legitimacy and ability to be an impartial referee. Yes it adds to the swag of a superpower, but it comes with a price tag. Global shocks like the covid-19 pandemic and climate change have exposed the weakening structure of these institutions. Exactly why the carefully crafted global rules regime is facing an unprecedented threat.
It is the moment the world needs to pull together. And the onus lies mostly with the developed world.
Recommended Viewing
Call it coincidence. I stumbled upon the fascinating work of David McRaney, a self-described psychology nerd and a thinker.
His latest tome, How Minds Change, is about to hit book stores and deals with the business of post-truth.
If you wish to pre-order a copy please click the following link.
As the book flap states:
“How Minds Change reveals how beliefs take hold, not over hundreds of years, but in less than a generation, in less than a decade, and sometimes in a single conversation.”
My research threw up a conversation he conducted with three experts on why this happens. It is long but extremely insightful—in understanding the post-truth world around us.
Hope you enjoy it as much as I did.
Till we meet again next week. Stay safe.
Dear Anil
Very interesting article! India 's wheat export was around 7 million tonnes in 2021 and India was looking to export 10 million tonnes of wheat in 2022-23. But to control rising domestic prices and to manage overall food security of our country ,the central government has taken the right step to ban wheat exports.
The retail inflation had surged to an eight year high in April 2022 due to the high prices of fuel and food items.The Russia Ukraine war has created havoc and economic turmoil in all countries.
Refreshingly hard hitting and an eye opener Anil. Thank you for this great analysis. It is high time that India wakes up and takes care of itself first. Why have these farsighted in the WEF in Davos, kept silent on the decisions taken by OPEC ? India was never a leader in exports of foodgrains and with a huge population to feed, our correct decision is to first ensure smooth flow of availability of foodgrains for our own population. I applaud the decision of the government and we should consider export of foodgrains when we have surplus and the global prices are really attractive. The scenario of protesting farmers will be a thing of the past. Topical and searching.... keep going Anil.