Govt seeks alternative wheat sources

Bangladesh is actively seeking alternative markets for wheat imports to meet its demand  despite the rising prices in the international market.

This challenge has been exacerbated by the Russia-Ukraine conflict, which has led to the subsequent collapse of the Black Sea Grain Initiative (BSGI), further complicating the country's sourcing mechanism.

Russia and Ukraine have long been the major sources of low-cost wheat imports for Bangladesh.

With the uncertainty surrounding the BSGI deal, the country is likely to face a potentially steep increase in the cost of wheat import, commodity importers have said.

With India's ban on wheat export since May 13 last year, Russia and Ukraine became even more crucial for Bangladesh's wheat supply.

Now, the collapse of BSGI has pushed Bangladesh to look towards alternative wheat exporting countries like Bulgaria, Romania, Argentina, and Brazil, although their capacities fall short in comparison.

Food Secretary Ismiel Hossain expressed hope that imports from Russia would continue, despite concerns over Ukraine.

He also expressed optimism that the BSGI deal might reopen, alleviating the crisis.

He said a meeting is planned with the Indian government on August 17 regarding import facilities, though India seems unlikely to lift its export ban, given its intention to import wheat.

Redhwanur Rahman, Head of Sales and Distribution of Bashundhara Food Division, one of Bangladesh's largest commodity importers and processors, said that wheat prices in the country may escalate further due to the suspension of imports from Russia and Ukraine after the termination of the BSGI initiative.

He also noted that the capacity of alternative sources like Bulgaria and Romania is not comparable to Russia and Ukraine.

With Russia and Ukraine being major wheat exporters globally, the suspension of exports from these countries could lead to an increase in demand and prices elsewhere, reflecting a ripple effect that may impact markets beyond Bangladesh.

International wheat prices have surged by 1.6 percent in July for the first time in nine months. The spike is attributed to the uncertainty over Ukraine's exports, following the decision taken by Russia, and the continual dry conditions in Canada and the United States, according to the FAO Cereal Price Index.

Since the BSGI came into effect on July 22, 2022, Ukraine has exported a substantial 33 million tonnes of wheat, maize, and other agricultural products, with 8.91 million tonnes of wheat alone.

Under the BSGI, a total of 30 countries bought wheat from Ukraine. Among them, Spain, Turkey and Bangladesh bought the most – 23.01 million tonnes, 15.79 million tonnes and 1.06 million tonnes respectively.

The recent collapse of the BSGI initiative has led to various complications in the international market. Import from Ukraine was suspended from July 18, with alternatives such as Russia, Romania, and Bulgaria being more expensive.

The price of wheat has become about $40 higher in the Romanian market and $50-$60 up in the Australian market compared to Ukraine.

Agricultural economist Dr. Jahangir Alam Khan said that the termination of BSGI would make the wheat market more volatile.

Bangladesh has already seen wheat imports decline from 6 million tonnes to around 4 million tonnes per year due to the import crisis and higher international prices.

Abdul Bashar Chowdhury, chairman of BSM Group, one of Bangladesh's most significant commodity importers, expressed concerns over the increasing costs in alternative markets.

The price of wheat has risen to $320 per tonne in Romania and $340 in Australia, up from $270-$280 before the BSGI's collapse.

The termination of the initiative has also led to the suspension of letters of credit (LC's) from Ukraine in the Black Sea route.

Bangladesh, producing around 1.1 million tonnes of wheat annually against a demand of 7.5 million tonnes, imported 3.87 million tonnes of wheat from July 2022 to June 2023.

The country's import was 0.31 million tonnes from July to August 7, 2023.

Abdur Razzak, former president of the Moulvibazar Wholesalers Association, said that the price of wheat may increase further as the import through the Black Sea route has been suspended.

The Black Sea grain deal, aimed at addressing the global food crisis by facilitating the safe export of Ukrainian grain during the conflict between Ukraine and Russia, was set to expire on July 17.

Despite multiple extensions, Russia stated that conditions for its continuation were not met.

The unfolding scenario portrays a complex and potentially destabilising picture for global grain markets.