Global wheat prices rose to the maximum amount allowed on Monday following India’s ban on exports and pushed prices to $12.47 a bushel.
This move put additional pressure on an international market already in short supply. Moreover, rising wheat and general food prices are putting pressure on consumers’ wallets, forcing some people to look to borrow money online and others to cut back on their household expenditure.
Global food crisis
The United Nations announced a global food crisis back in March with global food prices at an all-time high. Part of this came from Russia’s war on Ukraine which saw two of the biggest global exporters being cut off from the rest of the world. Not only is Ukraine the world’s biggest exporter of sunflower oil, it is also one of the major producers of cereals including maize and wheat.
Subsequently, the cost of everyday foods around the world have been increased, especially for sunflower oil and its alternatives and cereals. The cost of all goods has increased in recent months including cakes, bread, noodles and pasta. Food prices on the whole are 30% higher than they were at the same time last year.
The impact is being felt most keenly in less-developed countries and in low-income families who are struggling to keep up with the increasing prices of certain food items.
Squeeze on personal finances around the world
There is a well-documented cost of living crisis unfolding across the world, with costs of goods and services on the increase as a result of an explosion in consumer demand post-Covid. In extreme cases, some people are being forced to sell a house fast to be able to survive, but downsizing their home and using the difference to support themselves.
Overall, the squeeze on people’s finances is only growing for the moment and thus, with increases in wheat and food prices, this situation looks to be getting worse before it gets better.
Although there have been some savings in most countries in respect of covid travel testing no longer needed when travelling to most countries, the increase to the likes of fuel prices and food is weighing more heavily on people’s finances and looks set to be an ongoing problem for some time.
Russia and Ukraine’s role in increased global wheat prices
Wheat prices have been suffering as a result of Russia’s invasion of Ukraine and, as a result, have risen over 60% in 2022. Together, Russia and Ukraine account for nearly a third of the world’s wheat exports. In March alone, there was a surge of 19.7% in the prices of wheat, as well as an increase in the price of wheat alternatives such as barley, maize and sorghum.
India bans export of wheat
This week, India banned the export of wheat which has caused a surge in prices of wheat on internal markets. The benchmark wheat index rose up to 5.9% in Chicago - the highest figure in more than two months.
India announced the ban following a heatwave which hit India’s wheat crops; as a result, domestic prices hit a record high. The government of India agreed to continue to allow imports which are backed by letters of credits which have already been issued and to any countries needing supplies to “meet their food security needs”.
The ban is not a permanent move and is subject to revision. However, it is said by agricultural experts to have worsened what is already a dire situation. If other countries follow suit and decide to introduce export restrictions or close their markets, it could have a substantial impact on the rest of the world.
India is the world’s second-biggest wheat producer; however, most of its custom comes from domestic markets.
Yet, since losing Ukraine’s wheat exports, the global market has come to rely on India for exports of wheat. In addition, climatic conditions such as droughts and floods have threatened crops in other major wheat-producing countries; as a result, many were depending on India to fulfill their wheat supplies. It was estimated that, before the ban, India was set to export 10 million tonnes of wheat this year.