The administration stated that shipments secured by letters of credit already granted and to countries requesting supplies “to meet their food security needs” would be permitted. Following Russia’s invasion of Ukraine on February 24, global purchasers were counting on supply from the world’s second-largest wheat production. India had planned to send a record 10 million tonnes this year before the restriction. Although it is not one of the world’s top wheat exporters, India’s ban could drive global prices to new peaks given already tight supply, hitting poor consumers in Asia and Africa particularly hard.
Wheat prices in India have risen to record highs, in some spot markets hitting Rs25,000 ($320) per tonne, well above the government’s minimum support price of Rs20,150. Rising fuel, labour, transportation and packaging costs are also boosting the price of wheat flour in India. Rising fuel, labour, transportation and packaging costs are also boosting the price of wheat flour in India.
“The ban is shocking,” a Mumbai-based dealer with a global trading 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 retail inflation near an eight-year high in April, strengthening expectations that the central bank would raise interest rates more aggressively.
“It was not wheat alone. The rise in overall prices raised concerns 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, its abundance of caution,” he said. India just this week outlined its record export target for the fiscal year that started on April 1, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments.
The FCI has so far bought a little over 19m tonnes of wheat from domestic farmers, against last year’s total purchases of a record 43.34m tonnes. The FCI buys grain from local farmers to run a food welfare programme for the poor. Unlike previous years, farmers have preferred to sell wheat to private traders, who offered better prices than the government’s fixed rate. In April, India exported a record 1.4m tonnes of wheat and deals were already signed to export around 1.5m tonnes in May. “The Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” another dealer said.
In February the government forecast production of 111.32m tonnes, the sixth straight record crop, but it cut the forecast to 105m tonnes in May. A spike in temperatures in mid-March means the crop could instead be around 100m tonnes or even lower, said a New Delhi-based dealer with a global trading firm. “The government’s procurement has fallen more than 50 per cent. Spot markets are getting far lower supplies than last year. All these things are indicating lower crop,” the dealer said.
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