MUMBAI: India banned wheat exports onSaturday, just days after saying it was targeting recordshipments this year, as a scorching heat wave curtailed outputand domestic prices soared to an all-time high.
The government said it would still allow exports backed byalready issued letters of credit and to countries that requestsupplies “to meet their food security needs”.
Global buyers were banking on supplies from the world’ssecond-biggest wheat producer after exports from the Black Sea region plunged following Russia’s Feb. 24 invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tonnes this year.
Although it is not one of the world’s top wheat exporters,India’s ban could drive global prices to new peaks givenalready tight supply, hitting poor consumers in Asia and Africaparticularly hard.
“The ban is shocking,” a Mumbai-based dealer with a globaltrading firm said. “We were expecting curbs on exports after two to three months, but it seems like the inflation numbers changed the government’s mind.”
Rising food and energy prices pushed India’s annual retailinflation near an eight-year high in April, strengtheningexpectations that the central bank would raise interest ratesmore aggressively.
Wheat prices in India have risen to record highs, in somespot markets hitting 25,000 rupees ($320) per tonne, well abovethe government’s minimum support price of 20,150 rupees.
Rising fuel, labour, transportation and packaging costs arealso boosting the price of wheat flour in India.
“It was not wheat alone. The rise in overall prices raisedconcerns about inflation and that’s why the government had to ban wheat exports,” said a senior government official who asked not to be named as discussions about export curbs were private.
“For us, it’s abundance of caution,” he said.
SMALLER CROP
India just this week outlined its record export target forthe fiscal year that started on April 1, saying it would sendtrade delegations to countries such as Morocco, Tunisia,Indonesia and the Philippines to explore ways to boostshipments.
In February the government forecast production of 111.32million tonnes, the sixth straight record crop, but it cut theforecast to 105 million tonnes in May.
A spike in temperatures in mid-March means the crop couldinstead be around 100 million tonnes or even lower, said a NewDelhi-based dealer with a global trading firm.
“The government’s procurement has fallen more than 50%. Spotmarkets are getting far lower supplies than last year. All thesethings are indicating lower crop,” the dealer said.
Cashing in on a rally in global wheat prices after Russiainvaded Ukraine, India exported a record 7 million tonnes ofwheat in the fiscal year to March, up more than 250% from theprevious year.
“The rise in wheat price was rather moderate, and Indianprices are still substantially lower than global prices,” saidRajesh Paharia Jain, a New Delhi-based trader.
“In fact, wheat prices in some parts of the country hadjumped to the current level even last year, so the move to banexport is nothing but a knee-jerk reaction.”
Despite a drop in production and government purchases by thestate-run Food Corporation of India (FCI), India could haveshipped at least 10 million tonnes of wheat this fiscal year,Jain said.
The FCI has so far bought a little over 19 million tonnes ofwheat from domestic farmers, against last year’s total purchasesof a record 43.34 million tonnes. The FCI buys grain from localfarmers to run a food welfare programme for the poor.
Unlike previous years, farmers have preferred to sell wheatto private traders, who offered better prices than thegovernment’s fixed rate.
In April, India exported a record 1.4 million tonnes ofwheat and deals were already signed to export around 1.5 milliontonnes in May.
“The Indian ban will lift global wheat prices. Right nowthere is no big supplier in the market,” another dealer said.
($1 = 77.4700 Indian rupees)
