India bans wheat exports as heatwave affects crops and domestic prices soar

India bans wheat exports as heatwave affects crops and domestic prices soar

A combine dumps harvested wheat into a tractor wagon in a field on the outskirts of Ahmedabad, India March 16, 2022. REUTERS/Amit Dave

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  • A ban could push global wheat prices to new highs
  • Before the ban, India wanted to export 10 million tons of wheat
  • Heatwave affects wheat crop size and drives up prices
  • Government purchases fall more than 50% year-on-year

MUMBAI, May 14 (Reuters) – India banned wheat exports on Saturday, just days after it said it was targeting record shipments this year as a searing heatwave curtailed production and domestic prices soared to an all-time high.

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

Global buyers bet on supplies from the world’s second largest wheat producer after exports from the Black Sea region collapsed following Russia’s invasion of Ukraine on February 24. Before the ban, India had aimed to ship a record 10 million tonnes this year. Continue reading

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Though it’s not one of the world’s top wheat exporters, given already tight supply, India’s ban could push global prices to new highs, hitting poor consumers in Asia and Africa particularly hard.

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

Rising food and energy prices pushed India’s annual retail inflation near an eight-year high in April, fueling expectations that the central bank would hike interest rates more aggressively. Continue reading

Wheat prices in India have risen to record highs, reaching 25,000 rupees (US$320) a 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 increase in overall prices led to inflation concerns, which prompted the government to ban wheat exports,” said a senior government official, who asked not to be named because discussions of export restrictions are private.

“For us it’s an abundance of caution,” he said.

Smaller harvest

India just this week set out its record export target for the fiscal year that began April 1, saying it is sending trade delegations to countries including Morocco, Tunisia, Indonesia and the Philippines to explore ways to increase supplies.

In February, the government forecast production of 111.32 million tons, the sixth consecutive record harvest, but lowered the forecast to 105 million tons in May. Continue reading

A rise in temperatures in mid-March means the harvest could instead be around 100 million tonnes or even less, a New Delhi-based trader told a global trading firm.

“Government procurement has fallen by more than 50%. Spot markets are receiving far fewer supplies than last year. All of these things point to a lower harvest,” the trader said.

Benefiting from a rebound in global wheat prices following Russia’s invasion of Ukraine, India exported a record 7 million tonnes of wheat in the fiscal year ended March, up more than 250% year-on-year.

“The increase in wheat price has been rather moderate and Indian prices are still much lower than global prices,” said Rajesh Paharia Jain, a New Delhi-based trader.

“In fact, wheat prices in some parts of the country had already risen to current levels in the past year, so the export ban move is just a knee-jerk reaction.”

Despite a drop in production and government purchases by the state-owned 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 bought just over 19 million tonnes of wheat from local farmers, up from record purchases last year of 43.34 million tonnes. The FCI buys grain from local farmers to run a feeding program for the poor.

Unlike previous years, farmers have preferred to sell wheat to private traders, who offered better prices than the government’s fixed rates.

In April, India exported a record 1.4 million tons of wheat, and in May contracts were already signed to export around 1.5 million tons. Continue reading

“The Indian ban will raise global wheat prices. At the moment there is no major player in the market,” said another trader.

($1 = 77.4700 Indian Rupees)

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Reporting by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi; Edited by William Mallard & Simon Cameron-Moore

Our standards: The Thomson Reuters Trust Principles.

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