LONDON (Bywire News) -India’s decision to ban wheat exports has added to the strain felt by world markets already struggling due to problems in some of the biggest export areas in the world including Canada, Europe, Australia and of course, the war torn Black Sea.
The markets were quick to respond. Wheat futures in Chica jumped by their 6% limit sparking concern among trading firms and importers who had been banking on millions of tonnes of Indian wheat becoming available over the coming months.
India’s ban comes after a heat wave during a crucial phase in crop development which dented yields forcing the government to cut its output estimates to 105 million tonnes. Previously India had been on a run of five successive record crops and had hoped the next would be as high as 111.32 million tonnes. This was expected to free up 12 million tonnes for export, much higher than last year’s figure of 7.2million.
Strong demand on top of the low output pushed prices higher – in many cases beyond the government’s fixed procurement price. Farmers began selling wheat privately rather than to the state
This could be a massive blow to global supplies. Aside from China, India is the world’s second largest wheat producer. However, it rarely exports much of its grain due to massive domestic food demands. However, had it fulfilled expectations of 12 million tonnes of exports for 2022/23, it would have been ranked as the eighth largest exporter, behind Canada with 15.5million tonnes. Top destinations would have included the likes of Bangladesh, Indonesia, Nepal and Turkey with Egypt recently making its first purchase in an attempt to replace lost shipments from the Black Sea.
The problems are compounded thanks to difficulties in the other top producers. Europe, the US, Canada and Russia had accounted for around 60% of wheat exports between 2015 and 2020. Each though has suffered setbacks with their collective share dropping to lust over 50% thanks to droughts in Europe and North America.
Russia’s invasion of Ukraine threw a further spanner into the works severing shipments from the region and sparking a scramble for alternative supplies.
Australia, which was slated to be the third largest wheat exporter for this year has also suffered some quality problems in certain areas just before harvest and has sealed deals on most of their export volumes.
The decision means that the majority of India’s wheat will remain in the country. Exporters who had secured letters of credit to manage exports will see those honoured, but for the most part, India’s wheat supplies will be turned inward to satisfy domestic demand.
That leaves major buyers in Africa and the Middle East struggling to find alternatives to Black Sea supplies.
(Writing by Tom Cropper, editing by Klaudia Fior)