India decided to ban wheat exports on Saturday, just days after it said it was targeting record exports this year as it reduced production of scorching heat waves and raised domestic prices to an all-time high.
The government said it would continue to allow wheat exports, along with letters of credit already issued to those countries that demanded the goods “to meet their food security needs.”
With exports from the Black Sea declining following events in Ukraine in late February, global buyers relied on India for wheat supply. Prior to the ban, India had set a target of exporting 10 million tonnes this year.
Although India is not one of the largest wheat exporters in the world, the embargo could push global prices to new record levels and affect poor consumers in Asia and Africa.
A Mumbai businessman who handles global trade said, “The ban is shocking. We expected export restrictions in two or three months, but inflation figures seem to have changed the government’s view.”
Rising food and energy prices pushed India’s annual retail inflation to an eight-year low in April, reinforcing economists’ view that the central bank should raise interest rates further to control prices.
Wheat prices in India are at record highs, reaching Rs. Rising prices of fuel, labor, transport and packaging have also pushed up the price of wheat flour in India.
“Wheat is not alone,” said a senior government official, who asked not to be named because discussions on export restrictions were not public. The overall rise in prices raised concerns about inflation, which is why the government had to ban wheat exports. “For us, there are a lot of warnings,” he added.
India has set a record export target for the 2022-2023 financial year, which began on April 1 last week, and said it would send trade representatives to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to further increase exports.
But a sharp and sudden rise in temperature in mid-March could put yields at 100 million tonnes or less than expected, says a trader with a global trading firm based in New Delhi. The government estimates that production will reach an all-time high of 111.32 million tonnes.
India’s wheat exports reached a record seven million tonnes in the financial year ended March, 250 per cent higher than the previous year, after Ukraine benefited from higher global wheat prices following the events. In April, India exported 1.4 million tonnes of wheat and signed agreements to export about 1.5 million tonnes in May.
“World wheat prices will rise due to Indian embargo,” said one trader. There is currently no large supplier in the market. (Reuters)
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