Ukraine effect: Domestic wheat, sunflower oil prices set to rise

New Delhi, March 2:  Continuing hostilities between Russia and Ukraine are set to impact the domestic selling prices of wheat and sunflower oil.

Both countries produce massive quantities of wheat, while Ukraine is one of the world's largest sunflower seeds exporters.

Though India is self-sufficient in wheat, it does import some quantities of high grade grain, analysts said.

Moreover, the reduction in Russian and Ukrainian wheat in the international market will give an attractive opportunity for Indian exporters, thereby slightly pushing up domestic prices.

Lately, domestic wheat prices have seen an increase of Rs 300 per quintal to Rs 2,300 per quintal.

This trend is likely to continue till the arrival of new supply from April onwards.

However, in terms of sunflower seeds, India is heavily dependent on Ukrainian and Russian imports.

Imports are a relatively cheaper option as India's sunflower seed production is constantly hovering close to 60,000 tonnes for the last couple of years.

In this case, India can fulfil its requirement via crude palm oil (CPO). However, the prices of CPO have also risen recently.

These agro-commodities price trends, though at nascent stages, will push up inflation.

Already, India's main inflation gauge -- Consumer Price Index (CPI) -- which denotes retail inflation, has crossed the target range of the Reserve Bank of India in January.

Besides, the rate of rise in the Consumer Food Price Index, which measures the changes in retail prices of food products, increased to 5.43 per cent last month from 4.05 per cent in December 2021.

The trend assumes significance as retail inflation rate crossed the target range of the Reserve Bank of India.

The central bank has a CPI target range of 2-to-6 per cent.

"Domestic wheat prices have increased by Rs 300 per quintal. The ongoing conflict between Russia and Ukraine will add pressure on the domestic prices," said IIFL Securities VP, Research, Anuj Gupta.

"We expect the prices to remain elevated until fresh supplies come up."

Kshitij Purohit, Lead of Commodities and Currencies CapitalVia Global Research, said: "Both wheat and sunflower seeds' domestic prices are expected to see a rise due to the ongoing war between Russia and Ukraine. Wheat prices have risen by around Rs 300 per quintal. There has been an increase in prices of sunflower oil as well."

"The rise in sunflower seeds' prices have also pushed the CPO prices higher."

Hetal Gandhi, Director, Crisil Research, said: "With the ongoing geo-political issues in these countries (Russia and Ukraine), India could expand its (wheat) exports to countries like Bangladesh, Egypt, Indonesia and African nations... We expect wheat prices to inch up over the next 3-6 months."

"Over the next 3-6 months due to lower import of sunflower oil, Indian consumers may shift to soy and palm oil and hence, prices are expected to inch up for sunflower oil in the coming six months. How the political tensions pan out will determine prices over the long term."