#WhatTheFAQ: Why are rising wheat prices also leading to rising tensions?

The wheat price is fluctuating daily, and its alarming increase is also hitting headlines daily. Be informed. Read on to find out all the reasons and answers
FAQ April 20
FAQ April 20

Wheat prices have gone up around the world and it looks like they will continue to do so. The news is very worrying, as fears of food shortage loom large. India, which is a country with surplus wheat, also has been affected. Various factors have come into play to have enabled this important commodity to become a troublesome issue. Let's look at what has happened in detail.

How much exactly does wheat cost now?
The price of wheat has touched a 14-year record high. Currently, the Chicago Wheat futures have pegged the price, as of April 20, at $1114.25. The futures show that there has been a 41 percent hike in the price in March and the hike continues. The Chicago Wheat futures are exchange-traded commodities contracts on the Chicago Board of Trade (CBOT) and this data is used to calculate the wheat prices. The price as recorded on April 15, 2022, was $10.9650 per bushel (27.216 kg approx).

Why has the price increased?
The Russia-Ukraine war is to blame! Russia and Ukraine are the major wheat exporters. Together they account for around 29 percent of global wheat exports. And Russia's invasion of its neighbour has slowed down the exports. Wheat granaries in Ukraine have also been depleted, resulting in a price hike.

What does it mean for India?
India has its own surplus reserves of wheat. However, it has also been affected due to the global price rise. Even though it appeared to be a good prospect for India to enter into the field of global wheat export with the ongoing Russia and Ukraine crisis, it was seen that the global trade of wheat shall not be very economic for the country.
India has seen an annual increase in the minimum support price (MSP) for wheat. Due to this, the price of Indian wheat has become more expensive than world prices, making overseas sales uneconomic. It also strains the state finances to maintain such large inventories of the crop. India has also been facing issues related to the procurement of wheat from farmers.

Why do we have procurement issues?
The Indian government has not been very successful in procuring the required amount of wheat this year. While some say that producers have not been very keen in some states to sell their produce to the government, some opine that the procurement was affected due to harsh weather conditions, like heavy rains followed by a severe heatwave, in the wheat-growing season.

Then, what is going to happen now?
India has already recorded a five to seven percent increase in domestic wheat prices because of the ongoing problems. There has also been a low yield because of the unfavourable weather conditions. These facts shall surely pinch the pockets of Indians. However, if one looks at the bigger picture, India still stands a chance to become a global wheat exporter as of now.

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