Causes of Lower Wheat Prices and Higher Rice Prices
Published on: November 14, 2023.
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Prices of Wheat and Rice Show Opposite Trends in Global Market
Date: November 20, 2023
The prices of wheat and rice in the global market have taken opposite directions. While wheat prices have plummeted, rice prices have skyrocketed, leading to implications for inflation in India.
Wheat Prices
Wheat prices reached an all-time high of $13.64 a bushel ($501/tonne) on March 8, 2022, at the Chicago Board of Trade futures exchange. However, they have since dropped by more than half, with the current price standing at $5.75 a bushel ($211.4/tonne). The UN Food and Agriculture Organization’s Food Price Index (FPI) also decreased from a record 159.7 points in March 2022 to 120.6 points in October 2023.
Wheat from Russia is being exported at $227 per tonne, making imports feasible for Indian flour mills. The US Department of Agriculture (USDA) has projected record wheat shipments of 50 million tonnes in 2023-24. The availability of wheat has improved due to lower international prices and effective management of government stocks.
Rice Prices
Unlike wheat, rice prices have increased since March 2022 due to export restrictions imposed by India. India, being the largest exporter of rice, has banned exports of all white non-basmati rice. Only basmati and parboiled non-basmati rice shipments are permitted but subject to a minimum export price (MEP) stipulation and duty. These restrictions have led to higher global rice prices and benefited Pakistan, which is expected to export 5 million tonnes this year, up from 3.6 million tonnes in 2022-23.
However, the Pakistan government has also set floor prices to prevent domestic supply shortfalls. These MEPs range from $450/tonne on 100% broken rice to $900/tonne on white, parboiled, and steamed basmati rice.
Implications for Inflation
Inflation in India’s cereal market averaged 10.65% year-on-year in October, higher than general retail inflation and consumer food prices. Inflation in rice and wheat primarily depends on domestic production. While wheat imports have become economically viable, political considerations make it challenging. On the other hand, India’s heavy reliance on imports for edible oils has resulted in a decline in prices and negative inflation in the sector.
Ultimately, the future of cereal inflation in India will depend on the size of crops harvested by Indian farmers.
Source: Indian Express
