Well, that was an abrupt and unwelcome U-turn. A month ago India was boasting it would combat the gathering international food crisis by releasing some of its bounteous wheat stocks on world markets. Last Saturday Narendra Modi’s government downgraded its ambitions from feeding the world to just feeding India, announcing an export ban on wheat after sudden heatwaves pushed down forecast domestic production and drove up prices. With Ukrainian wheat production expected to fall by a third this year and Russia seizing Ukrainian grain and destroying its farms, the risk of the food crisis spiralling out of control just went up another notch.
There’s a pretty clear parallel between India’s volte-face on wheat and the Covid vaccine shortages last year. Its super-competitive pharma industry boasted of inoculating the world, and the government initially enjoyed the reflected soft-power glory, but New Delhi cut off exports when its own country’s needs called louder.
You see here the dangerous gap where a system of global governance ought to exist but doesn’t. When an international food or vaccine crisis hits, budding claims of abundant supply and international solidarity shrivel pretty quickly in the heat of domestic expedience. There are lots of conversations among governments about global food security — the G7 group of rich countries sprang into rhetorical action to criticise India’s export ban this week — but nothing like enough co-ordination to make it happen.
Although India’s export restrictions are more likely to be used as a calibrated management tool than outright prohibition, commodity markets weren’t happy, global wheat futures shooting higher on Monday. The situation is particularly worrying for importing nations in the Middle East and north Africa, which consume wheat in vast quantities and tend not to substitute with other grains. Egypt, the world’s biggest wheat importer, approved India as a vendor in April: it has had to seek assurances that its recent order for half a million tonnes of grain will be fulfilled.
Saleable stocks are the relevant issue here. Overall global grains production has generally been satisfactory in the past few years, according to US Department of Agriculture data. If trading were instant and costless and all food were substitutable and tradable, there wouldn’t be so much of an issue. But strong demand, and latterly some bad harvests, including in the southern US states, mean that the wheat stocks held by the biggest global exporters are at their lowest in a decade.
In India’s case, it wasn’t just bad luck with the harvest. The problem has arisen from a complex and inefficient way of distributing wheat, which is bought by a government agency, the Food Corporation of India, and sold on at subsidised rates or added to public stocks. There’s actually been plenty of wheat in the country, but mismanagement of procurement has left the FCI suddenly scrambling to meet its needs.
As ever, global problems stem from domestic ones, and frequently from political choice rather than economic inevitability. Food crises aren’t usually about an overall lack of food. They’re about the inability of the authorities to get it to where it’s needed, usually through some combination of lack of data, poor policy and neglect.
A while back I wrote about Modi saying India wasn’t allowed to export wheat to resolve the crisis because the World Trade Organization told it not to. This was a slight exaggeration on his part, but it’s true there are WTO rules against countries inefficiently subsidising farmers with high fixed prices and dumping the food cheaply abroad. Rules stopping cheap food reaching world markets may look odd, but this weekend’s news from India shows their long-term benefits. It’s not sensible to let food-importing countries become dependent on subsidised and dumped exports that can suddenly be turned off at source.
The world needs some more efficient large-scale food producers who systematically and reliably prioritise exports, and so far it doesn’t have enough. There is still distressingly little sense of a well-planned response to the food crisis, either internationally or through the actions of individual countries. There’s lots of talk about co-ordinated action, but India’s sudden change of tack shows how hard it is to make plans stick.
alan.beattie@ft.com
Source: Economy - ft.com
