With India’s wheat buffer stocks declining to a 14-year low, neighbouring Bangladesh is having to pay more to import the cereal. In fact, it is even being forced to make a U-turn.
Dhaka had decided to cancel a tender to import 50,000 tonnes on July 14 as it received only one bid from a Singapore firm at a price of over $450 a tonne. But on Wednesday (July 27), Dhaka decided to accept the bid, made by Intra Business Pte Ltd at $476.38 a tonne.
This is $28 higher than the tender that closed on July 5 and was finalised last week. Another Singapore firm Agrocorp International was the sole bidder in the tender.
Traders said Dhaka’s problem was mainly in view of India, its primary supplier over the last couple of years, being unable to come to its rescue, particularly since wheat stocks with the Food Corporation of India (FCI) had dropped to 28.5 million tonnes (mt), the lowest since 2008.
“Bangladesh has to accept single bids and pay higher prices as it is facing a hand-to-mouth situation with regard to wheat,” said Delhi-based exporter Rajesh Paharia Jain. “Over the past three months, it has not been able to get much wheat to meet its domestic demand,” he said.
Intra Business Pte Ltd has offered to supply wheat of any origin. The grain can now come from Bulgaria, Romania, Australia or Canada, Jain said.
Bangladesh had to buy wheat at a higher price since India, its main supplier last fiscal, banned its exports from May 13. Though India said its ban was to help neighbouring and vulnerable countries, it has not been of much help.
India’s problems are that as of July 1 this year, wheat stocks with FCI dropped to the lowest since 2008 as farmers did not offer their produce to the government under the minimum support price (MSP) programme.
Ukraine war impact
Since the start of the rabi harvest season this year, wheat prices have been ruling above the MSP of ₹2,015 a quintal fixed for this year in view of export demand. This was mainly due to the Ukraine war which affected supplies of agricultural commodities such as wheat, corn and sunflower to the global market. Russia and Ukraine account for about 30 per cent of the total wheat supply in the global market.
The demand saw about 1.4 mt of wheat being exported from India in April. With a heatwave sweeping Indian wheat-growing areas in March and April, the production of the foodgrain was affected. This resulted in the production estimates being lowered to 106.41 mt from a record 111.43 mt.
With surging inflation complicating the situation in the domestic market, the Indian government banned wheat exports from May 13. This has proved to be a big problem for Bangladesh, which imported 56 per cent of the total 7.23 mt of wheat shipped out by India in 2021-22 In April-May this fiscal, Dhaka accounted for 0.64 mt of the 2.6 mt (0.65 mt same period a year ago) wheat that India exported.
In June, Bangladesh said it had become “increasingly dependent” on Indian wheat and would need at least 6.2 mt of wheat this fiscal to meet its increasing demand.
Until India banned wheat exports, Dhaka was receiving bids for wheat imports at a far more competitive price.
Bangladesh’s decision to opt for the single bid comes at a time when the global wheat market has turned volatile after declining to a five-month low witnessed on July 15. Currently, benchmark wheat futures on the Chicago Board of Trade are quoted at $8.05 a bushel ($295.78 a tonne).
In India, wheat prices have gained five per cent over the past month. Currently, the net weighted average modal price (the rate at which most trades take place) is ₹2,175 a quintal.
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 1 mt totally to make up for the shortfall in supplies from Russia. Hope for Dhaka now hinges on how quickly supplies from the Black Sea region improve after the UN has brokered a deal to allow Russia and Ukraine to export wheat and other food commodities.
The lowest bid for Bangladesh wheat tenders so far has been offered by India’s Bagadia Brothers at $399.69 a tonne. The offer was made in the tender that was opened on April 11.