Global wheat prices shot up a record 6% on Monday following India’s decision to restrict overseas sales of the staple, exacerbating a global food crisis, trading data showed. The world was banking on India to alleviate wheat supplies crimped by the Ukraine war.
India, the world’s second-largest wheat grower, on May 13 said it was banning private exports to manage its food security which is “at risk”, keeping a window open for overseas shipments only on the specific request of a foreign government to “meet their food-security needs”.
The country’s move to ban overseas sales will worsen a global food shortage and could drive up prices even more, analysts said.
According to a Financial Times report, wheat futures traded in Chicago Board of Trade, a global benchmark, rose 5.9% to $12.47 a bushel (about 27 kg), touching a two-month high, while overall prices of the staple have risen more than 60% this year on the back of disruptions due to the Ukraine war. Russia and Ukraine account for almost a third of the world’s total wheat exports.
In Europe, wheat prices surged to a new record on Monday, jumping to 435 euros ($453) per tonne (100 kg) at the benchmark Euronext market, up from the previous record of 422 euros on Friday, an AFP report said.
“India isn’t a big exporter of wheat in normal years. Yet, its ban on exports have set prices on fire precisely because global supplies are currently running very thin,” said Ashok Agrawal of Comtrade, a trading firm.
India was hoping to export large quantities as the government had forecast a record output of 111 million tonne of wheat in February. A heatwave from mid-March shrivelled the winter staple, forcing the government to cut production estimates by at least 5.7% to 105 million tonnes.
“…there is a sudden spike in the global prices of wheat arising out of many factors, as a result of which the food security of India, neighbouring and other vulnerable countries is at risk”, the Indian commerce ministry order banning exports said.
India exported a record 7.85 million tonnes in the fiscal year to March, up 275% from a year ago. Before the export ban took effect, the country had already contracted to export 4.5 million tonne as the government sought to ramp up overseas sales.
These sales are expected to go through if formalities, such as letters of credit, have been issued, according to the government’s notification curbing export. In April 2022, the country’s traders sold 1.4 million tonne overseas, taking advantage of high global demand and prices.
“If this ban occurred in a normal year the impact would be minimal, but the loss of Ukraine volumes exacerbates the issues,” Andrew Whitelaw, a grains analyst at Melbourne-based Thomas Elder Markets, told Bloomberg.