Dwindling Indian wheat stocks set to deal another blow to Bangladesh

The lowest stock of wheat registered in India in 14 years and surging dollar prices mean Bangladesh's wheat troubles are still far from over. 

On Saturday, price of wheat went down by T4 to 5 per kilogramme as India resumed exports through the Hili Land Port in Dinajpur.

This, however, would bring a short-term respite. 

Haroon Ur Rashid, president of Hili Land Port Import Export Group, told The Business Standard that India has not yet lifted the ban on exports, however, wheat is being exported through Hili port against the LCs which were open before the export ban.

Although Bangladesh was set to receive a much-needed import injection of wheat from India, despite its 1 May ban on exports of the staple, that may now be in jeopardy too, owing to India's own domestic troubles.

As of 1 July this year, wheat stocks according to the Food Corporation of India (FCI) dropped to its lowest since 2008 as farmers did not offer their produce to the government under the minimum support price (MSP) program.

At the same time, heatwaves in India's wheat-producing areas in March and April affected cereal production, with the country now believing they may not meet expected production. 

India's wheat stocks are currently down to 28.5 million tonnes, according to India media reports citing the FCI. 

Muhammad Mahbubur Rahman, senior assistant secretary (External Procurement), Ministry of Food, told The Business Standard, "Before the export ban was announced, one lakh tonnes of wheat was in the process of being imported from India. It hasn't arrived yet, it's still in the process. However, the government is importing 50,000 tonnes of wheat from two companies in Singapore, reaching a total of one lakh tonnes.

"After the export ban, India wanted to know about our public and private needs. We have informed them of that. But there has been no decision yet."

According to sources in the Ministry of Food, the Bangladesh High Commission in India had given information to open letters of credit (LCs) for importing 6-7 lakh tonnes of wheat before the export ban. 

In the current financial year, the government also sent a letter through the Bangladesh High Commission informing about the need to import 10-12 lakh tonnes of wheat from India. 

The letters were sent following India's decision to continue allowing wheat exports to Bangladesh.

But India is yet to respond.

Furthermore, according to Indian media, the country may be inching towards a U-turn and currently has no plans to review its wheat exports ban as domestic prices of the cereal continue to soar.

Meanwhile, the climbing dollar rate means Bangladesh has to spend more takas than before to procure the staple.

For the wheat Bangladesh is set to export from two companies in Singapore, it will be paying $11.9 per bushel (25 kilogrammes).

According to The Wall Street Journal (WSJ), wheat is now being sold at $8.12 per bushel in the international market. Within a month of the start of the Ukraine Russia war, that had risen to around $13.

But as long as the dollar remains high, Bangladesh will not be benefitting from a low cost.

Md Taslim Shahriar, assistant general manager of Meghna Group, told TBS, on the one hand, the market had shrunk while on the other hand increasing dollar prices meant it was difficult to reap the benefit of a reduction in world market prices. "As a result, we now have to count our losses," he said.

With surging inflation complicating the situation in the domestic market, the Indian government banned wheat exports from 13 May. This proved to be a big problem for Bangladesh, which imported 56% of the total wheat shipped out by India in 2021-22 In April-May this fiscal. 

According to the International Grains Council, US Soft Red Winter wheat is currently offered at $336 a tonne, while Europe is offering French grade I at $358. US Hard Red Winter wheat is quoted at $385 and Argentine wheat at $410.

Bangladesh has been floating wheat import tenders regularly to buy one million tonnes to make up for the shortfall in supplies from Russia.  

The hope for Dhaka now hinges on how quickly supplies from the Black Sea region improve after the UN brokered a deal to allow Russia and Ukraine to export wheat and other food commodities. 

Bangladesh has been grappling with soaring commodity prices, while the country's wheat stocks hit their lowest in three years at 166,000 tonnes last month.

The country is the third largest importer of wheat from Ukraine, after Egypt and Indonesia, having purchased 2.3 million tonnes in 2021.

According to a report by the USDA, Russia and Ukraine combined supplied 42% of Bangladesh's total wheat import in the marketing year 2020-2021.