India banned wheat exports on Saturday, just days after saying it was targeting record shipments this year, as a hot wave curtailed output and domestic prices soared to an all-time high.
After Russia invaded Ukraine on February 24th, the government said it would still allow exports backed by already issued letters of credit and to countries that request supplies for their food security needs. Global buyers were banking on supplies from the world's second biggest wheat producer, because of the fall in exports from the Black Sea region. India had a goal of 10 million tons this year before the ban.
India's ban could cause global prices to go up Wv 1 to new peaks due to tight supply, hitting poor consumers in Asia and Africa particularly hard, even though it is not one of the world's top wheat exporters.
A Mumbai-based dealer with a global trading firm said the ban was shocking. After two to three months, we expected to see curbs on exports, but it seems like inflation numbers have changed the minds of the government. In April, rising food and energy prices pushed India's annual retail inflation near an eight-year high, strengthening expectations that the central bank would raise interest rates more aggressively.
In India, wheat prices have risen to record highs, in some spot markets hitting 25,000 rupees $320 per tonne, well above the government's minimum support price of 20,150 rupees.
In India, rising fuel, labour, transportation, and packaging costs are boosting the price of wheat flour.
It was not wheat alone. The government was forced to ban wheat exports because of the rise in overall prices, according to a senior government official who asked not to be named as discussions about export curbs were private.
He said there was a lot of caution for us.
India has set a record export target for the fiscal year that started on April 1, which it said it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to look at ways to boost shipments.
The production of 111.32 million tons, the sixth straight record crop in February, was forecast by the government in February, but it cut the forecast to 105 million tons in May.
A spike in temperatures in mid-March means that the crop could be around 100 million tonnes or even lower, said a New Delhi-based dealer with a global trading firm.
The government's procurement has fallen more than 50%. Spot markets are getting less supplies than last year. The dealer said all these things indicate a lower crop.
India exported a record 7 million tons of wheat in the fiscal year to March, a increase of more than 250% from the previous year, as a result of a rally in global wheat prices after Russia invaded Ukraine.
The wheat price went up rather moderate, and Indian prices are still lower than global prices, said Rajesh Paharia Jain, a New Delhi-based trader.
The move to ban exports is nothing but a knee-jerk reaction, as wheat prices in some parts of the country had jumped to the current level even last year. 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 about 19 million tons of wheat from domestic farmers, against last year's total purchases of 43.34 million tons. The FCI buys grain from local farmers to run a food welfare programme for the poor.
Unlike previous years, farmers prefer to sell wheat to private traders, who offered better prices than the government's fixed rate.
In April, India exported a record 1.4 million tons of wheat and deals were already signed to export around 1.5 million tons in May.
The Indian ban will lift global wheat prices. There is no big supplier in the market, according to another dealer.