India bans wheat exports as heatwave slashes production and skyrocketing prices

India banned wheat exports with immediate effect on Saturday, just days after saying it was targeting record shipments this year as a scorching heat wave slashed production and local prices hit an all-time high amid strong demand. of export.

The government said it would still allow the export of letters of credit that have already been issued and at the request of countries that are trying to “meet their food security needs”.

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Global buyers were betting on the world’s second-biggest wheat producer for supplies after exports from the Black Sea region fell following Russia’s invasion of Ukraine in late February. Before the ban, India was targeting to ship a record 10 million tonnes this year.

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

“The ban is shocking,” said a Mumbai-based trader with a global trading company. “We were expecting export cuts after 2-3 months, but it looks like 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, strengthening economists’ view that the central bank would have to raise interest rates more aggressively to contain prices. .

Wheat prices in India rose to a record high in some spot markets, reaching 25,000 rupees ($322.71) per tonne, against the government’s minimum fixed support price of 20,150 rupees.

smaller cut size

Earlier this week, India outlined its record export target for the 2022/23 fiscal year, which began April 1, adding that it would send trade delegations to countries including Morocco, Tunisia, Indonesia and the Philippines to explore ways to further increase more shipments.

But a sharp and sudden rise in temperatures in mid-March means the crop size could be smaller than expected by around 100 million tonnes or even smaller, a New Delhi dealer with a global trading company said, against a government estimate for a total uptime of 111.32 million tonnes.

“Government purchases dropped by more than 50%. Spot markets are getting much lower supplies than last year. All these things are indicating a smaller crop,” the dealer said.

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.

“The Indian ban will drive up global wheat prices. At the moment there is not a major supplier in the market,” said the second dealer.

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