India has banned wheat exports with immediate effect, just days after saying it was targeting record shipments this year, as a scorching heatwave curtailed output and local prices hit an all-time high amid strong export demand.
Key points:
- India is the world’s second largest wheat producer but consumes most of it domestically
- It had previously looked to capitalise on disruptions to wheat supplies from the war in Ukraine
- But a smaller wheat crop due to a sudden rise in temperatures could threaten Indian food security
A notice in the government gazette by the Directorate of Foreign Trade said a spike in global prices for wheat, partly due to the war in Ukraine, was threatening the food security of India and neighbouring and vulnerable countries.
The government said it would still allow exports for letters of credit that have already been issued and on the request from countries that are trying “to meet their food security needs”.
Prior to the ban, India was targeting to ship out a record 10 million tonnes this year.
Global buyers were banking on the world’s second-biggest wheat producer for supplies after exports from the Black Sea region plunged following Russia’s invasion of Ukraine.
Before the war, Ukraine and Russia accounted for a third of global wheat and barley exports.
Since Russia’s February 24 invasion, Ukraine’s ports have been blocked and civilian infrastructure and grain silos have been destroyed.
The Indian ban could drive up global prices to new peaks and hit poor consumers in Asia and Africa.
“The ban is shocking,” a Mumbai-based dealer with a global trading firm said.
“We were expecting curbs on exports after two to three months, but [it] seems inflation numbers changed government’s mind.”
Rising food and energy prices pushed India’s annual retail inflation up towards an eight-year high in April, strengthening economists’ view that the central bank would have to raise interest rates more aggressively to curb prices.
Wheat prices in India have risen to record highs, in some spot markets to as high as 25,000 rupees ($465) per tonne, versus the government fixed minimum support price of 20,150 rupees.
Lower crop size due to heat wave
Even though it is the world’s second-largest producer of wheat, India consumes most of the wheat it produces.
It had set a goal of exporting 10 million tons of the grain in 2022-23, looking to capitalise on the global disruptions to wheat supplies from the war and find new markets for its wheat in Europe, Africa and Asia.
Much of that would have gone to other developing countries such as Indonesia, the Philippines and Thailand.
Apart from problems with weather hurting harvests, India’s own vast stocks of wheat — a buffer against famine — have been strained by distribution of free grain during the pandemic to some 800 million people.
But a sharp and sudden rise in temperatures in mid-March means the crop size could be smaller than expected at around 100 million tonnes or even lower, a New Delhi-based dealer with a global trading firm said, versus a government estimate for an all-time high of 111.32 million tonnes.
“The government’s procurement has fallen more than 50 per cent. Spot markets are getting far lower supplies than last year. All these things are indicating lower crop,” the dealer said.
In April, India exported a record 1.4 million tonnes of wheat and deals were already signed to export around 1.5 million tonnes in May.
“Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” the second dealer said.
AP/Reuters
