Wheat export ban: India’s extreme heat wave is having ripple effects on the world’s food supply

New Delhi: India’s heat wave is having ripple effects for the world’s food supply as the country over the weekend banned wheat exports just days after saying it was targeting record shipments this year. The scorching heat wave has curtailed output and domestic prices hit a record high.
India will now approve exports to countries that require wheat for food security needs and based on the requests of their governments. It will also allow shipments for which irrevocable letters of credit have already been issued.
Wheat prices have risen more than 60 per cent this year, driven up by disruption from Russia’s invasion of Ukraine, and after India’s ban, wheat futures traded in Chicago rose as 6 per cent to $12.47 a bushel, their highest level in two months. India’s announcement drew sharp criticism from the Group of Seven industrialized nations’ agriculture ministers meeting in Germany, who said that such measures “would worsen the crisis” of rising commodity prices.
“If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,” German Agriculture Minister Cem Ozdemir said at a press conference in Stuttgart.
The move to ban the export of wheat was prompted by rising inflation. Retail inflation hits an eight-year high of 7.79 per cent in April, driven by rising food and fuel prices.
Global buyers were banking on supplies from India, which is the world’s second-biggest wheat producer after exports from the Black Sea region plunged following Russia’s invasion of Ukraine in mid February. Before the ban, India had aimed to ship a record 10 million tons this year. But at least 10 to 15 percent of the wheat crop has died for farmers in northern India, the country’s most productive region due to extreme heat, which overtaxes the plant and prevents it from forming any grain.
Last month, Prime Minister Narendra Modi told US President Joe Biden that India could step in to ease the global shortfall created by Russia’s invasion of Ukraine. The two countries account for nearly a third of all global wheat exports, and the United Nations Food and Agriculture Organization has warned that the conflict could leave an additional 8 million to 13 million people undernourished by next year.
India’s wheat exports hit 8.7 million tons in the fiscal year ending in March, with the government predicting record production levels — some 122 million tons — in 2022. Last week, India outlined its record export target, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments. In February, the government forecast production of 111.32 million tons, the sixth straight record crop, but it cut the forecast to 105 million tons in May as a spike in temperatures in mid-March meant the crop could instead be around 100 million tons or even lower. The heat wave is hitting wheat-growing regions particularly hard, with temperatures this week set to hit 44 degrees in Punjab, and 42 degrees in Uttar Pradesh.
What adds to India’s heatwave woes is that India has to now import coal to keep up with its power and energy requirements which, again thanks to Russia’s war, is driving the coal prices through the roof. As average global temperatures keep, extreme weather events such as flooding and heat waves would become rising common and devastating. In fact one study has found that rising temeratures have reduced some Indian crop yields by 5.3 percent between 1981 and 2019. The results of climate inaction over the next half centuary, according to Deloitte, would be economic losses to the tune of $35 trillion in present value terms, which implies 12.5% ​​of India’s GDP in 2070 alone.
Deloitte predicts that unchecked climate change would turn India’s economic growth story into one of decline. Climate damage would put India’s position as a modern, global manufacturer and services-based economy at risk.Unchecked climate change threatens India’s contemporary economic engine with 80% of GDP at risk. Services, manufacturing, retail and tourism, construction, and transport will incur the greatest climate-related losses over next 50 years and by 2070, would experience an average annual loss in the value added to GDP of more than US$1.5 trillion per year.
If substantial actions are not taken, climate change, would, on average, reduce India’s economic potential by 5.5 percent a year over the next 50 years.. The losses would increase rapidly as continue to rise, with net present temperatures losses to India’s GDP growing by more than five fold between 2050 and 2070,” it said in a report titled ‘India’s turning point.’
Another report by the medical journal The Lancet shows that India’s vulnerability to extreme heat increased 15% from 1990 to 2019, and that India is among the top five countries where vulnerable people, like the old and the poor, have the highest exposure to heat. It and Brazil have the highest heat-related mortality in the world, and farm workers are the most vulnerable.
Weaker production also leads to a drop in farmers’ income, squeezing margins just as costs of fertilizer and fuel have soared. One alternative is to sow wheat early as the intensity and frequency of hot weather will increase in the coming years. India recorded an average maximum temperature of 33.1 degrees Celsius (91.6 degrees Fahrenheit) in March, an all-time high. In April, temperatures surged to 46 degrees Celsius in some places. No respite is likely in the coming days.
Farmer Puneet Singh Thind in Punjab — known as the country’s food bowl — told Bloomberg that his output at his 18-acre farm has slumped 40% compared with normal seasons, mainly due to heavy rains previously and the heat wave conditions in March. He’s had to incur extra costs to deal with the erratic weather, such as draining excess water from the field.
The extreme heat has also led to a loss of work hours: India is set to lose over 100 billion work hours every year if such heat waves persist, according to a December 2021 study published in the science journal Nature.
Heat exposure of laborers is linked to multiple health impacts, including premature death; workplace injuries; morbidity from heat-related illness; and acute kidney damage. Indeed, heat exposure is a potential contributing factor to an epidemic of chronic kidney disease of unknown etiology in otherwise healthy, relatively young workers in Central America, Sri Lanka, India, and Egypt, and other parts of the world, according to the paper which Also added that heat exposure can raise the absorption of certain chemicals and is associated with adverse pregnancy and mental health conditions.
India has already lost around 259 billion hours of labor annually between 2001 and 2020 due to the impacts of humid heat, according to a study from researchers at Duke University. The loss of these productive hours cost India $624 billion (Rs 46 lakh crore)–equivalent to almost 7% of its 2017 gross domestic product (GDP).24-Jan-2022.
Impact of the ban:
“The impact of the wheat export ban on India’s domestic food inflation is likely to be muted. This export ban is a pre-emptive step and may prevent local wheat prices from risingly; However, with domestic wheat production likely limited by the heatwave, local wheat prices may not moderate materially. If India’s wheat ban leads to higher price of substitutes like rice, then there could be upward pressure on other food prices,” said Nomura in a note.
Trade experts also believe the ban will cool the market prices of wheat that had soared past the minimum support price (MSP) in the recent months. Wheat was being purchased by private players at rates above the MSP that led to an increase in market prices of wheat as farmers preferred to sell their wheat in the open market. Private traders will now be forced to free up stockpiles that were held in anticipation of a further rise in prices.
With inputs from Bloomberg and Reuters


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