India bans wheat exports as heat wave hurts crops and domestic prices soar

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

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  • Ban could push global wheat prices to new highs
  • India aimed to export 10m tonnes of wheat before ban
  • Heat wave reduces size of wheat crop and pushes prices up
  • Government purchases drop more than 50% from last year

MUMBAI, May 14 (Reuters) – India banned wheat exports on Saturday, just days after saying it was aiming for record shipments this year, as a scorching heat wave reduced production and domestic prices hit a record high.

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

Global buyers were banking on supplies from the world’s second-largest wheat producer after exports from the Black Sea region plummeted following Russia’s February 24 invasion of Ukraine. Before the ban, India was aiming to ship a record 10 million tonnes this year. Read more

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

“The ban is shocking,” said a Mumbai-based dealer with a global trading company. “We were expecting export restrictions after two to three months, but it seems the inflation figures have changed the government’s mind.”

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

Wheat prices in India hit record highs, reaching 25,000 rupees ($320) a tonne in some spot markets, well above the government’s minimum support price of 20,150 rupees.

Rising fuel, labor, transportation and packaging costs are also driving up the price of wheat flour in India.

“It wasn’t just wheat. Rising global prices have raised concerns about inflation and that is why the government had to ban wheat exports,” said a senior government official who asked not to be named as discussions of the restrictions export were private.

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

SMALLER HARVEST

India this week outlined its record export target for the fiscal year which began April 1, saying it would send trade delegations to countries including Morocco, Tunisia, Indonesia and the Philippines to explore ways to increase shipments.

In February, the government forecast a production of 111.32 million tonnes, the sixth record harvest in a row, but it reduced the forecast to 105 million tonnes in May. Read more

A spike in temperature in mid-March means the harvest could instead be around 100 million tonnes or even less, said a New Delhi-based dealer with a global trading company.

“Government purchases have fallen by more than 50%. Spot markets are getting much lower supplies than last year. All of these things point to a weaker harvest,” the dealer said.

Benefiting from a rise in world 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% over the previous year.

“Wheat price rise has been rather subdued, and Indian prices are still significantly below world prices,” said Rajesh Paharia Jain, a New Delhi-based trader.

“In fact, wheat prices in some parts of the country reached their current level even last year, so the decision to ban exports is nothing more than a knee-jerk reaction.”

Despite a decline in production and government purchases by the state-run Food Corporation of India (FCI), India could have shipped at least 10 million tonnes of wheat this fiscal year, Jain said. .

The CFI has so far purchased just over 19 million tonnes of wheat from domestic farmers, up from last year’s total purchases of a record 43.34 million tonnes. The FCI buys grain from local farmers to run a food welfare program for the poor.

Unlike in previous years, farmers preferred to sell wheat to private traders, who offered better prices than the fixed government rate.

In April, India exported a record 1.4 million tonnes of wheat and agreements have already been signed to export around 1.5 million tonnes in May. Read more

“The Indian ban will drive up global wheat prices. Right now there is no big supplier 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; Editing by William Mallard and Simon Cameron-Moore

Our standards: The Thomson Reuters Trust Principles.

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