Skyrocketing global prices have made Indian wheat exports very competitive and in a position to partially fill the void left by Russia and Ukraine.
World Bank Chief David Malpass has said that the war in Ukraine is a 'economic catastrophe' for the world at a time when inflation is already rising and this will surely cut global economic growth. He added that the economic impact of the war will result in the rise in prices of oil and gas, which will hit the poor the most.
The grim forecast comes at a time when oil prices are at its highest in more than seven years. The Brent crude is already hovering above the USD 112 a barrel mark. Countries, which are part of the European Union (EU), are expected to be hit badly. However, India will also not be spared from the effects of the war.
Supply disruptions have hit global prices of wheat, soybean, fertiliser and metals like copper, steel and aluminum - raising worries about prices and economic recovery.
Read | DNA Explainer: How Ukraine-Russia war will impact export of various commodities?
What it means for India?
Skyrocketing global prices have made Indian wheat exports very competitive and in a position to at least partially fill the void left by Russia and Ukraine.
Wheat from Gujarat, Rajasthan and Uttar Pradesh is now being delivered at Rs 2,400-2,450 per quintal, as against Rs 2,100 or so hardly 15 days ago.
This is above the government's minimum support price (MSP) of Rs 2,015/quintal for the new wheat crop that will arrive in the markets from mid-March.
Portion of wheat from western and central India may be exported rather than going to the Food Corporation's godowns, putting pressure on public stocks.
In such a situation, the government needs to carefully manage both its own stocks and also the overall domestic availability position in wheat.
Edible oil prices skyrocketing
Vegetable oils and oilseeds prices are skyrocketing. This includes sunflower and soyabean oil. Palm oil in Malaysia has also hit all-time-high.
The situation may likely benefit the mustard growers in Rajasthan and Uttar Pradesh, who are set to market their crop in the coming weeks.
At present the mustard prices are ruling at Rs 6,500-plus per quintal, which is again above the Minimum Support Price (MSP) of Rs 5,050.
Brent crude oil prices
Brent at USD 110-115/barrel is also helping lift the prices of cotton because of synthetic fibres becoming costlier.
Raw materials have become costlier for synthetic textile manufactures due to a sharp increase in crude oil prices.
Agri-commodities can be diverted for production of ethanol (sugar and corn) or bio-diesel (palm and soyabean oil).
Prices above MSP and a good monsoon can act as an inducement for farmers to expand acreages in the kharif season.
This includes cotton, soyabean, groundnut, sesamum and sunflower for farmers to expand acreages in kharif season.
That will serve the cause of crop diversification, especially weaning farmers away from paddy, if not sugarcane.
Effect of war on fertilisers
The ongoing tension on the Black Sea due to the Russia-Ukraine war is impacting fertiliser prices as well.
India imported nearly a third of its MOP from Belarus (0.92 mt) and Russia (0.71 mt) out of 5.09 mt in 2020-21
With supplies chocked, more quantities will have to be procured from countries like Canada, Jordan and Israel.
International prices of other fertilisers like urea, di-ammonium phosphate, complexes have gone up in one month.
Their raw materials/intermediates like ammonia, phosphoric acid, sulphur and rock phosphate too have gone up.
These commodities essentially track crude and gas prices. But the effects are not confined to oil this time.
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