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Analysis: Food export restrictions from Argentina to India run the danger of causing inflation

Image: Reuters Berita 24 English -  Last month, it only took 24 hours for India 's government—the second-largest producer of wheat in th...

Image: Reuters

Berita 24 English -  Last month, it only took 24 hours for India's government—the second-largest producer of wheat in the world—to abandon its intentions to "feed the world."

Following five straight record-breaking harvests, Modi had stated in April that the world's most populous democracy was prepared to increase its wheat exports in order to partially replace the void created by Ukraine in the world's grain markets. India typically only exports a small portion of its wheat output, keeping the majority for home use.

India's Ministry of Commerce & Industry announced on May 12 that it was getting ready to send delegations to nine nations to export a record 10 million tonnes of wheat this fiscal year, a significant increase from the previous season.

But a flood of alarming data altered everything.

Early in May, after a violent heatwave decimated yields, India's wheat crop was first revised downward. Then, on May 12, figures revealed that the 1.4 billion-person country's inflation had risen to almost an eight-year high as a result of increasing food and gasoline prices brought on by the conflict in the Ukraine.

According to a government official who asked to remain anonymous due to the sensitive nature of the subject, Modi's office instructed the Ministry of Commerce to immediately put the "brakes on" wheat exports on May 13 as a result of rising inflation, which had been a factor in the overthrow of the previous Congress party government in 2014 as well.

According to a second source, "this (inflation figures) caused the administration to issue an order at midnight" prohibiting wheat exports.

Chicago wheat futures rose 6% on Monday when markets reopened as a result of news of the restriction by India, the only significant wheat exporter at that time of year.

A request for feedback received no response from Modi's office or the Ministry of Commerce.

Since the war in Ukraine drove up prices, hampered the flow of international trade for various agricultural items, and sparked violent protests in certain poor countries, at least 19 countries, including India, have imposed export limits on food.

Governments enforced restrictions from Delhi to Kuala Lumpur, Buenos Aires to Belgrade, at a time when the COVID-19 pandemic's economic harm, combined with variables like harsh weather and supply chain bottlenecks, had already drove hunger to record-breaking heights throughout the world.

Before the Ukraine conflict started, the U.N. World Food Programme (WFP) reported that 276 million people in the 81 countries it operates in were already experiencing acute food insecurity, which is defined as when a person's inability to consume enough food puts their lives or livelihoods in danger.

It was estimated that at least 33 million more people would be affected by the war, especially in sub-Saharan Africa, which hampered exports from Russia and Ukraine, two agricultural superpowers.

As long as they are temporary and necessary to address "critical shortages," members of the World Trade Organization are permitted to impose export limits or restrictions on foodstuffs or other products.

The International Monetary Fund (IMF) and the World Trade Organization (WTO) were contacted by India's Commerce Minister Piyush Goyal to underscore the importance of India prioritising its own food security, maintaining domestic prices, and preventing hoarding.

However, Michele Ruta, the lead economist in the Macroeconomics, Trade & Investment Global Practice of the World Bank Group, warned that export restrictions run the risk of exacerbating the rise in global food prices by creating a domino effect as a worsening crisis forces other nations to follow suit.

According to many economists, the current food crisis is already worse than the previous one, which peaked in 2008 and was triggered by factors such as droughts, population growth around the world, higher meat consumption in significant developing economies, and increased use of crops to produce biofuels.

Protests were sparked by shortages at the time all across the world, but especially in Africa where food accounts for a relatively large portion of household budgets.

The assurances given by international organisations to national governments in 2008 that there was enough food for everyone in the world, according to Simon Evenett, professor of international trade and economic development at the University of St. Gallen, diminished some of the momentum for export restrictions.

The magnitude of the summer harvests in the major food producers will influence how things develop in the second half of 2022, said Evenett. "This time around that is difficult to achieve as we do have a supply hit here in both Ukraine and Russia," he added.

According to data from the U.S. Department of Agriculture, Ukraine and Russia exported a combined 28 percent of wheat, 15 percent of corn, and 75 percent of sunflower oil in the 2020/21 season.

In the past two months, as harvest time approaches, global food prices have steadied at high levels. A drought in the United States is expected to reduce the amount of the winter wheat crop, while this month's hail, violent winds, and torrential rains devastated the wheat crops in France.

Argentina, the sixth-largest exporter of wheat worldwide, has had dry weather, which has delayed crop sowing and reduced expectations for production in the 2022–2023 growing season.

After years of populism and increased animosity between significant geopolitical players, Evenett added, the atmosphere in international forums like the G20 is now less cooperative.

Look at the risks to political stability that emerged in 2008 to see how much more frightening the current scenario is, he added. "The next six to nine months are going to be quite tense for us."


Given the shortage of food supplies around the world, some nations had already established export restrictions the previous year. However, after Russia's invasion of Ukraine on February 24, when the price of both grains and vegetable oils soared globally, the dominoes truly started to fall.

Argentina raised export duties on soybean oil and meal in March and reduced the annual cap on new wheat shipments.

India's restriction on wheat exports came after Indonesia, the leading producer of palm oil in the world, prohibited exports of palm oil from April 28 onward, citing the need to make sure the nation had "abundant and inexpensive supply."

The largest palm oil importer in the world is India, and one of its major suppliers is Indonesia. On May 20, Indonesia lifted its embargo.

After a global feed scarcity aggravated by the conflict in Ukraine interrupted poultry production and caused a dramatic increase in costs for one of the nation's cheapest sources of protein, Malaysia banned the export of chickens on May 23.

According to the International Food Policy Research Institute (IFPRI), a Washington-based think tank that aims to reduce poverty in developing countries, the wave of export restrictions already affects close to one-fifth of calories traded globally. This is nearly twice the impact of the previous global food crisis in 2008

According to IFPRI analyst David Laborde Debucquet, "These types of policies tend to generate some panicky behaviour or hoarding on the purchasers side...that increases the price spike."

The European Union, which is home to some of the largest food importers in the world, is pleading with its trading partners to avoid adopting protectionist measures.

In a speech last month, Ursula von der Leyen, president of the EU Commission, said, "The European Union keeps its food exports going, and so should everyone else."


Argentina's government, fighting internal inflation that has reached over 60%, took action late last year to stop the rise in local food prices even before the conflict in Ukraine. In addition to a previous prohibition on the export of beef, it set limits on the exports of corn and wheat.

Following the invasion by Russia, it took further action by increasing the levies on shipments of processed soy oil and meal.

Argentina is a significant exporter of wheat, the second-largest producer of corn, and the world's largest exporter of soybean oil and meal.

The government's top objective, according to a source in Argentina's agriculture ministry who asked not to be named because he was not authorised to speak to the media, is to protect the food required for internal consumption.

The insider claimed that the export restrictions put in place in late 2021 served to protect domestic millers and consumers from the surge in global prices that followed the conflict in Ukraine.

The director of Argentina's CIARA-CEC chamber of grains processors and exporters, Gustavo Idigoras, claimed that despite export restrictions and new tariffs, the government had struggled to control Argentina's entrenched food price inflation, which was already high before the conflict in Ukraine.

In the metropolitan area of Buenos Aires, the price of bread has increased by 69 percent in a year, the price of meat by 64 percent, and the price of vegetables by 66 percent, leading people to alter their diets and look for lower prices.

Buenos Aires businesswoman Edith Elizabeth Plou, 39, walked many miles from her home to the city's enormous Central Market in order to find lower pricing for her groceries, the cost of which had increased significantly over the previous year.

Plou stated, "I work eight hours, and the fact is that I frequently consider getting a second job to help pay my bills.

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