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New Delhi: Wheat prices in international markets hit a record high on Monday, May 16, following India’s decision to ban wheat exports in a bid to counter food inflation domestically. The price jumped to 435 euros ($453) per tonne of wheat as the European market opened on Monday, AFP has reported.
US and European wheat futures climbed by nearly 6%, with the Chicago market – the global benchmark – earlier reaching its daily trading limit and Paris prices approaching all-time highs.
By 11:35 GMT, Chicago futures were up 4.3%, off an earlier two-month peak, while Paris prices were up 4.1%.
Wheat has contributed to record highs this year for global food prices as measured by the UN’s food agency, with Russia’s invasion of Ukraine upending the market by halting massive shipments from Ukrainian seaports. Before the war, Ukraine accounted for 12% of global exports, which now stands badly affected.
India’s embargo, prompted by a heatwave that has cut harvest prospects and sent domestic prices soaring, marks a policy U-turn after the government maintained just days earlier it was still targetting record exports of 10 million tonnes that would help compensate for Ukraine’s reduced supply. India is the world’s second-largest wheat producer.
The authorities said they will allow existing export sales covered by letters of credit and government-to-government deals to meet food security needs.
While many traders and analysts had expected export curbs at some stage due to the worsening effects of the heatwave, the sudden announcement adds to pressure on the market for one of the world’s most consumed cereals.
“It’s a tight market and wheat stocks are going down, especially in exporting countries,” Carlos Mera, head of agri commodities research at Rabobank, said.
“Wheat is a sensitive and politicised market, there are food security concerns in many countries.”
Facing spikes in food inflation, other nations have also sought to preserve domestic supply, with Indonesia banning exports of palm oil at the end of April.
The Indian export ban comes as harsh weather, including drought in parts of the United States and France, threatens production potential in other major exporting countries. According to AFP, the curbs on wheat exports have drawn sharp criticism from the ‘Group of Seven’ industrialised nations, which said that such measures “would worsen the crisis” of rising commodity prices.
“If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,” German agriculture minister Cem Ozdemir told AFP at a press conference in Stuttgart.
With Ukraine facing protracted export disruption and Russia’s own capacity to export clouded by Western financial sanctions, despite favourable crop prospects, there may be no short-term relief for wheat importers.
“We’re in unchartered territory, it’s a perfect storm,” a European grain trader said. “Fighting social unrest is high on the agenda of every government.”
Traders were assessing how much wheat would nonetheless be shipped from India under previously struck private-sector deals and through government-to-government arrangements.
Egypt said on Sunday that it had agreed to buy half a million tonnes of wheat from India and the purchase would be exempt from the export embargo.
Traders will be watching closely the weather in North America and Europe to see if the harvest outlook improves there.
In France, overnight storms brought some rain to parched crop belts but the country’s main farm union said more regular precipitation was needed as cereal crops mature.
In the United States, winter wheat ratings have been at their worst since 1996 while spring wheat planting has been hampered by wet weather.
(With inputs from agencies)