India bans wheat exports as heat wave hurts crops, domestic prices rise

The government said it would still allow exports, supported by letters of credit already issued, and to countries requesting supplies “to meet their food security needs”.

The move to ban overseas shipments was not forever and could be under review, senior government officials said at a news conference.

Global buyers have been counting on deliveries from the world’s second largest wheat producer after Black Sea exports plummeted following the February 24 Russian invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tons this year.

The officials added that there was no dramatic drop in wheat production this year, but unregulated exports had led to a rise in local prices.

“We do not want the wheat trade to be conducted in an unregulated or hoarded manner,” trade secretary BVR Subrahmanyam told reporters in New Delhi.

While not one of the world’s largest wheat exporters, India’s ban could push world prices to new peaks given already tight supply, which is particularly hard on poor consumers in Asia and Africa.

“The ban is shocking,” said a Mumbai-based dealer at a global trading company. “We expected export restrictions after two to three months, but it seems that the inflation figures have changed the government’s mind.”

Rising food and energy prices pushed annual retail inflation in India to an eight-year high in April, reinforcing expectations that the central bank would raise interest rates more aggressively.

Wheat prices in India have risen to record highs, reaching 25,000 rupees ($320) per tonne in some spot markets, well above the government’s minimum support price of 20,150 rupees.

Rising fuel, labour, transportation and packaging costs are also driving up the price of wheat flour in India.

“It wasn’t just wheat. The rise in aggregate prices raised concerns about inflation and so the government had to ban wheat exports,” said another senior government official, who asked not to be named as discussions over export restrictions were private. . “For us, it’s an abundance of caution.”

Smaller harvest

India this week outlined its record export target for the fiscal year starting April 1, saying it would send trade delegations to countries like Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments.

In February, the government forecast production of 111.32 million tons, the sixth consecutive record crop, but cut the forecast to 105 million tons in May.

A spike in temperatures in mid-March means the harvest could instead be around 100 million tons or even lower, said a New Delhi-based dealer with a global trading company.

“Government purchasing has fallen by more than 50%. Spot markets are getting much less supply than last year. All these things point to a lower harvest,” said the dealer.

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Benefiting from a surge in global wheat prices after Russia invaded Ukraine, India exported a record 7 million tons of wheat in the fiscal year to March, up more than 250% from the previous year.

“Wheat price rises have been quite moderate and Indian prices are still significantly below world prices,” said Rajesh Paharia Jain, a New Delhi-based trader.

“Wheat prices in some parts of the country had actually risen to current levels last year, so the move to ban exports is nothing but a knee-jerk reaction.”

Despite a decline in production and government purchases by the state-run Food Corporation of India (FCI), India could have shipped at least 10 million tons of wheat this fiscal year, Jain said.

The FCI has so far purchased just over 19 million tons of wheat from domestic farmers, up from last year’s total purchase of a record 43.34 million tons. It buys grain from local farmers to run a food welfare program for the poor.

Unlike in previous years, farmers have preferred to sell wheat to private merchants, who offered better prices than the government’s flat rate.

In April, India exported a record 1.4 million tons of wheat and agreements were already signed in May to export about 1.5 million tons.

“The Indian ban will increase global wheat prices. At the moment there is no major supplier on the market,” said another dealer.

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