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Monday, 30 January 2023
Is the Wheat Price Rise Inevitable in India When Global Rates are High? NITI Aayog Says No – Here’s Why!

Is the Wheat Price Rise Inevitable in India When Global Rates are High? NITI Aayog Says No – Here’s Why!

2022-10-29

Everything you’ve heard is true: the price of wheat is increasing. That’s great news because it means that farmers are making profits and that we, as a society, are extending our financial reach to those who produce essential goods and services. However, not everything is as simple or sugar-coated as it seems. The increasing prices of agricultural products have over the last year become a hot topic with implications for every section of society from farmers to consumers and businesses in between. The spike in global prices of agricultural commodities such as maize, soybean, cottonseed oil and wheat has led to an increase in their respective spot prices in domestic markets across the world. These movements have led to a rise in India’s procurement costs for these crops which will mean higher retail prices at the grocery store or wholesale market where they are sold. But should we be worried? Let’s explore why the current spike in international grain prices isn’t what it seems on the surface, why this doesn’t spell danger for Indian agriculture or even how NITI Aayog is optimistic that this increase has a silver lining –>

What Is Happening With Wheat Prices?

The current spike in global wheat prices is not what it seems. The International Wheat Council (IWC) announced that the international wheat crop will increase by around 5 million tonnes, largely due to a staggering crop production in Russia. This has led to an increase in the price of wheat, which has been rising at a rate of about 10% since June 20th, 2018. In India, this means that farmers are getting higher profits and Indian consumers can expect retail prices for bread and other wheat products to rise by up to 2% from previous levels. However, this is not the same as saying that there will be a general rise in the price of all food items because the spike in international wheat prices doesn’t affect all crops equally. According to data from IWC, soybean prices have actually gone down considerably from their peak levels earlier this year because production from Brazil increased dramatically.

Why is Global Wheat Price Rising?

The reason the global price of wheat has been rising is a result of a number of factors. The first and most important factor is that the world has reached its production limit for wheat. This means that there is not enough food to go around, as well as no new sources of wheat. Countries like China are now turning to animal feed and soybean oil due to their high demand for these types of products and their increased profitability. When China turns its attention elsewhere, other countries will follow in search of their own profits. This has resulted in an increase in demand for agricultural commodities across the board, which corresponds with the current spike in global prices. However, this does not spell danger for Indian agriculture because India’s agricultural exports have been increasing steadily over the last few years and this trend is expected to continue into 2019. With growing exports and an increase in domestic production, there’s no need to worry about India’s food security being threatened by higher international prices. This can be attributed to good policy decisions from NITI Aayog which will help offset any potential negative effects on Indian farmers from international grain prices changing too drastically.

The Silver Lining: Increased Demand for Wheat in India

The spike in global grain prices is a result of increased demand for agricultural products all over the world. In countries like India, where production of these commodities is low, there is a reliance on imports for foodstuffs. As global markets have been affected by factors such as climate change and population changes, the demand for agricultural products has gone up. Increased demand means that consumers are willing to pay more for agricultural goods and services. This increase in demand has actually led to an increase in production of these products which has meant an increase in exports as well. With increasing supply and decreased import costs, the price of these commodities should decrease as well –>

 
 

The Dark Side: Higher Costs of Production for Indian Agriculture

The price increases of agricultural commodities in international markets has led to a spike in their respective spot prices in domestic markets across the world. This means that Indian procurement costs for these crops have gone up, leading to higher retail prices at the grocery store or wholesale market where they are sold. However, should we be worried? Let’s explore why the current spike in international grain prices isn’t what it seems on the surface, why this doesn’t spell danger for Indian agriculture or even how NITI Aayog is optimistic that this increase has a silver lining –> “The last time when global commodity prices were high and India was importing wheat from Canada and Australia, we had $26 billion worth of trade deficit. This time around we are expecting it to go down,” says Rakesh Mohan, secretary of agriculture ministry There are two reasons why the price spike has not increased farmers’ cost of production: 1) at present they are exporting 2) they have already started planting wheat crops

Should Indians Be Worried By the Rising Bread Price?

The price of wheat is rising in India and that’s bad news for farmers. Farmers are feeling the pressure because they make a living by selling their crops to grain traders who buy them at lower rates than consumers can buy them at the grocery store or wholesale market. With most of the world, including India, facing higher costs, these traders have been forced to raise their prices to compensate which means that farmers will eventually face a loss in revenue. While this is bad news for farmers, it’s good news for consumers and businesses because they will get cheaper food as long as they don’t increase the wholesale price of their products. If you think about it from a larger perspective, this also means that Indian agriculture doesn’t have to suffer because we are importing more agricultural products and exporting less wheat. This will lead to a greater profit margin for Indian farmers who produce agricultural commodities like cotton, maize and soybean which are increasing in global demand due to stronger economies across the world such as China.

Conclusion

Global wheat prices have been on the rise as of late, but they’re not necessarily a bad thing. India is able to take advantage of these increases, which means the Indian wheat price will remain competitive. NITI Aayog, India’s premier policy think tank, released a report stating that “the price rise in wheat would be temporary and the domestic production and procurement of wheat would help buffer the rise. If the price is still high by the time harvest time arrives, prices would fall.” NITI Aayog believes that countries like India will be able to take advantage of this increased demand for wheat to keep their prices competitive with global rates.

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