India bans wheat exports as heat wave affects yields and domestic prices rise

A collective deposit of wheat harvested in a tractor cart on March 16, 2022 in a field on the outskirts of Ahmedabad, India. REUTERS / Amit Dave

Mumbai, May 14 (Reuters) – India has banned wheat exports as the impact of the scorching sun has reduced production and pushed up domestic prices to an all-time high.

The government said it would still allow exports to countries that have already issued letters of credit and are seeking goods “to meet their food security needs.”

In the wake of Russia’s February 24 occupation of Ukraine and the collapse of exports from the Black Sea, global buyers have been bankrolling supplies from the world’s second-largest wheat producer. Prior to the ban, India had set a target of exporting 10 million tonnes this year. read more

While it is not one of the world’s leading wheat exporters, India’s ban could push world prices to new heights, given the already tight supply, particularly severely affecting poor consumers in Asia and Africa.

“The ban is shocking,” said the dealer of a global trading company based in Mumbai. “After two or three months we expected export restrictions, but inflation numbers seem to have changed the mind of the government.”

Rising food and energy prices pushed up India’s annual retail inflation to an eight-year low in April, strengthening expectations that the central bank would raise interest rates even more sharply. read more

Wheat prices in India have risen to an all-time high of Rs 25,000 ($ 320) per tonne in some spot markets, well above the government’s minimum support price of Rs 20,150.

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

“It’s not just wheat. Overall inflation has raised concerns about inflation, which is why the government had to ban wheat exports,” said a senior government official, adding that discussions on export restrictions were personal.

“For us, it’s very cautious,” he said.

Small crop

India this week outlined its record export target for the fiscal year beginning April 1, saying it would send trade representatives to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost exports.

The government forecast production of 111.32 million tonnes in February, the sixth consecutive record crop, but in May it fell to 105 million tonnes. read more

A New Delhi-based dealer with a global trade body said the crop could be around 100 million tonnes or less as temperatures rise in mid-March.

“Government purchases have fallen by more than 50%. There are far fewer products available in the spot markets than last year. All of these indicate lower yields,” the trader said.

With global wheat prices soaring after Russia’s occupation of Ukraine, India exported 7 million tonnes of wheat in the financial year to March, 250% higher than the previous year.

“The rise in wheat prices was moderate and Indian prices are still significantly lower than global prices,” said Rajesh Baharia Jain, a New Delhi-based trader.

“In fact, wheat prices in some parts of the country have risen to current levels even last year, so the move to ban exports is nothing more than a knee-jerk reaction.”

Jain said India could have exported at least 10 million tonnes of wheat this financial year, despite the decline in production and government procurement by the Food Corporation of India (FCI).

FCI has so far procured 19 million tonnes of wheat from domestic farmers, up from 43.34 million tonnes in total purchases last year. FCI buys grains from local farmers to run a food welfare program for the poor.

Unlike previous years, farmers wanted to sell wheat to private traders who offered better prices than those set by the government.

In April, India exported 1.4 million tonnes of wheat and had already signed agreements to export about 1.5 million tonnes in May. read more

“The Indian ban will push up global wheat prices. There is currently no big supplier in the market,” said another trader.

($ 1 = 77.4700 Indian Rupees)

Report by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi; Editing: William Mallard & Simon Cameron-Moore

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