The conflict in West Asia may stall India’s return to the global wheat market, just as the rabi harvest is set to hit markets later this month. The development marks a setback for farmers and traders in the world’s second-largest producer, which has reopened exports after nearly four years of restrictions.
Uncertainty in shipping logistics is affecting forward deals with importing countries as well as procurement plans with farmers. Exporters are wary of committing to large shipments, given that freight rates remain volatile and vessel schedules uncertain. The development assumes significance given that India's wheat production this financial year is expected to reach a record 120 million tonnes.
“With the crisis in West Asia intensifying, there is lacklustre sentiment among both importers and exporters due to higher freight costs and logistical uncertainties. Things are likely to be clear in due course of time," said Vikas Jain, proprietor, Osho Marketing House, a Delhi-based export firm.
“Though global wheat prices have increased, it could have been a good opportunity for Indian farmers and traders to earn better returns through exports. However, disruptions in global supply chains and the rise in freight charges have reduced that opportunity,” another exporter said, who wishes not to be quoted.
Price rise
The FAO Cereal Price Index averaged 108.6 points in February, up 1.1 points (1.1%) from January, but still 4 points (3.5%) lower than its level a year earlier. World wheat prices rose 1.8% in February, supported by reports of frost and increased winterkill risks in parts of Europe and the US.
“Logistical disruptions in the Russian Federation and continuing tensions in the Black Sea region also contributed to the increase,” the FAO said in its report released on 6 March.
“India had the opportunity to tap export markets during the Russia-Ukraine war, but the ban on wheat exports prevented exporters from taking advantage of it,” said Bhagwan Meena, a farmer from the Malwa region in Madhya Pradesh.
Echoing the views of farmers and exporters, industry representatives said that traders and processors may remain cautious this season, as escalating tensions in West Asia may disrupt wheat exports to several markets in the region. Also, market participants indicated that many buyers may limit procurement volumes and avoid building large inventories in order to prevent a repeat of last year’s losses.
“Sentiment among the wheat trade and industry is likely to remain subdued this year, as many incurred losses last season after buying wheat at prices close to minimum support price (MSP) levels, and were unable to recover their carrying costs. As a result, the trade and industry are expected to be more cautious in procurement this season, with many likely to limit purchases and avoid building large inventories to prevent a repeat of last year’s losses,” said Navneet Chitlangia, president of the Roller Flour Millers’ Federation of India.
Nearby markets
In response, Indian exporters are likely to redirect supplies to nearby markets where demand remains steady and transportation costs are lower, Chitlangia said.
“Countries such as Bangladesh, Nepal and Sri Lanka are expected to see higher wheat shipments from India as exporters look for stable and accessible markets,” Chitlangia added.
Queries sent to the ministry of consumer affairs and food distribution remained unanswered till press time.
Nearly four years after imposing a blanket ban on wheat exports in May 2022, the Centre on 13 February reopened shipments of up to 2.5 million tonnes (mt) of the grain and 500,000 tonnes of processed products, citing comfortable domestic stocks and a favourable production outlook.
The government has set a target of 30.3 million tonnes of wheat procurement for the ensuing rabi marketing season 2026–27, out of the total estimated production of 120 million tonnes, which represents about 25% of the projected output. Of the remaining 75% of the estimated production, about 50–60% is procured by private traders and processors, traders said.
Export fall
Prior to the export ban, India was a significant exporter of wheat, with shipments valued at $2,122.13 million in FY22 and $1,520.46 million in FY23. However, exports dropped sharply after the restrictions were imposed, falling to $56.74 million in FY24 and declining further to just $2.03 million in FY25, reflecting the near-halt in overseas shipments during the period.
Trade experts point out that the Gulf turmoil has put India’s farm exports worth $11.8 billion of agricultural and food products at risk, accounting for 21.8% of India’s total agri exports.
“India’s agricultural exports have developed a deep dependence on West Asian markets over the past decade, particularly for products such as rice, bananas, spices, meat and dairy products. The Gulf has been a natural destination due to its geographic proximity and large Indian diaspora,” said Ajay Srivastava, founder, Global Trade Research Initiative (GTRI).