Global wheat prices surge by 6% after India's export ban
When global markets opened Monday, international wheat prices were up nearly 6% per bushel (or 27.21 kg) compared to Saturday after India's wheat export ban. However, the local wheat prices have fallen by 4-8% in various states of India. The rates declined by Rs. 200-250 per quintal (100kg) in Rajasthan, Rs. 100-150/quintal in Punjab, and around Rs. 100/quintal in Uttar Pradesh. Here's more.
- India is currently the world's second-largest wheat producer, only after China, and accounts for 5% of the total world's wheat exports.
- Many countries were relying on India, particularly after shipments from the Black Sea stopped following the Russia-Ukraine war in February, leading to a 40% global price surge in March.
- India's decision to restrict wheat exports follows the harvest misfortune due to the heatwave.
On Monday, the price of wheat futures in Chicago reportedly rose 5.9% to $12.47/bushel, the highest level in two months. On Friday, the day India levied the ban, the closing price for a bushel was $11.77. Meanwhile, wheat surged to a new record high in the European market on Monday, with the price surging to €435 (roughly $450 or Rs. 35,000) per ton.
India estimates that about 45 lakh metric tons of wheat have been contracted for export in the current fiscal year (April 2022 to March 2023). Interestingly, in April 2022 alone, 14.63 lakh metric tons were exported—a month after the Russia-Ukraine war began. Furthermore, in April 2022, 95,167 metric tons of atta (wheat flour) were exported—four times the 25,566 metric tons exported in April 2021.
India's move to ban wheat exports drew criticism from the Group of Seven (G7) nations. "If everyone starts to impose export restrictions...that would worsen the crisis," German Food and Agriculture Minister Cem Ozdemir earlier said. However, Chinese state-owned media surprisingly defended India and advised G7 nations to join the efforts in tackling the global food crisis instead of criticizing developing countries like India.
Responding to G7 nations' criticism, Union Minister Hardeep Singh Puri stated India's wheat supplies were "comfortable" and it would honor commitments to neighboring and vulnerable countries. He said the decision to restrict exports was taken with a "focus on India's food security, ensuring affordable food grain and to combat market speculation." India previously justified its move by citing decreased output and higher world prices.
Government officials earlier said the export ban was imposed "to manage the overall food security" of India and fulfill the needs of neighboring and vulnerable countries. They said the main reason behind the decision was that China is drawing food grains from India after crop losses led to food security concerns there. The ban has raised fears of famine and unrest in poorer nations.
Officials have also stated that while the export deals made before Friday's directions may still be fulfilled, any future shipments will require clearance from the Centre. "We don't want the wheat to go in an unregulated manner," NDTV quoted Commerce Secretary BVR Subrahmanyam as saying. He said wheat "serves the food requirements of vulnerable nations and people."
According to official estimates, India has reduced its wheat output expectations by 6.3 tons as a result of the heatwave. Previously, the country had five consecutive years of record crops. Meanwhile, the government has also previously declared export limitations on onion seeds. "The export policy of onion seeds has been put under the restricted category with immediate effect," it said.
To recall, India's Commerce Ministry officials reportedly said last week they were positive about increasing the country's wheat exports and that "India was ready to feed the world." Therefore, the ban actually seems like a policy U-turn, hinting at the government's concerns over rising domestic prices. Before the export prohibition, India had aimed to ship a record 10 million tons of wheat this year.