India bans wheat exports with immediate effect

India bans wheat exports with immediate effect

India, the world’s second largest wheat producer, has blocked all exports of the grain with immediate effect.

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India banned wheat exports effective immediately on Saturday, just days after it said it was aiming for record shipments this year as a searing heatwave curbed production and local prices hit an all-time high amid strong export demand.

The government said it would continue to allow exports for letters of credit already issued and at the request of countries trying 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 slumped following Russia’s invasion of Ukraine in late February. Before the ban, India had aimed to ship a record 10 million tonnes this year.

The Indian ban could push global prices to new highs and hit poor consumers in Asia and Africa.

“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 apparently the inflation numbers have changed the government’s mind.”

Rising food and energy prices pushed India’s annual retail inflation to an eight-year high in April, bolstering economists’ view that the central bank would need to raise interest rates more aggressively to contain prices.

Wheat prices in India have risen to a record high, as high as 25,000 rupees (US$322.71) a tonne in some spot markets, against a government-set minimum support price of 20,150 rupees.

Heatwave shrinks crops

Earlier this week, India outlined its record export target for the March 1st

However, a sharp and sudden rise in temperatures in mid-March means the harvest volume could be smaller than expected at around 100 million tonnes or even lower, a New Delhi-based trader at a global trading firm said, compared to a government estimate for an all-time high of 111 .32 million tons.

“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.

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.

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

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