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India may review wheat export plans as US drought prompts food crisis worries

Record highs for corn and soybeans due to US drought may signal an impending food crisis
India wheat exportEnlarge
Indian workers sift through rotting wheat. As a new food crisis looms due to drought in the US, India may revisit plans to allow dealers to export wheat. (AFP/Getty Images)

India, the world's second-largest grower of rice, wheat and sugar, will review its export rules and consider curbing the amount of food crops that traders can stockpile, as a drought in the US and the worst monsoon in three years raise the specter of an impending food crisis.

“I am concerned about the deficient rain,” Food Minister K.V. Thomas told reporters after a meeting with Prime Minister Manmohan Singh Thursday, according to the Australian Age newspaper. “We will get a clear picture about the situation after 15 days,” the paper quoted Thomas as saying.

As GlobalPost reported earlier, India recently okayed the export of 2 million tons of government-owned wheat and released another 8 million tons to the domestic market, in a bid to make room in storage facilities and prevent wheat from rotting in the fields. However, the real problem is not a surplus of grain or a lack of adequate storage facilities, but the government's inability or refusal to distribute more grain to the country's legions of hungry people.

Selling the grain at a loss is an intrinsic part of India's food procurement system, which is meant to subsidize farm prices on one end and subsidize food prices on the other. Moreover, holding onto the grain instead of selling it results in an even larger loss to the treasury than selling at a subsidized price would cause. So apart from the moral argument for letting hungry people eat, the government's role as the country's worst hoarder makes little economic sense -- especially as it mulls curbs on how much produce private traders can stockpile.

Dry weather from the US to Australia has parched fields, pushing up global corn and wheat prices and curbing a decline in food costs. El Nino weather conditions, which can parch Asia and bring cooler weather to the U.S., may develop during July to September, the World Meteorological Organization said June 26, the Age reported.

But the efforts of developing countries to prepare for an impending food crisis could cause added headaches.

“One of the big concerns about a repeat of the food crisis is whether we are likely to see the export policy in key producing and exporting countries changing,” the Age quoted Sudakshina Unnikrishnan, an analyst at Barclays Plc in London, as saying. “An underperforming Indian monsoon does raise concern that potentially there could be some sort of export curbs.”

http://www.globalpost.com/dispatches/globalpost-blogs/india/india-wheat-food-crisis