India bans wheat exports as heat wave hurts crop, domestic prices soar

By Rajendra Jadhav, Mayank Bhardwaj and Nigam Prusty

MUMBAI (Reuters) -India banned wheat exports on Saturday days after saying it was focusing on report shipments this yr, as a scorching warmth wave curtailed output and home costs hit a report excessive.

The federal government mentioned it might nonetheless enable exports backed by already issued letters of credit score and to international locations that request provides “to satisfy their meals safety wants”.

The transfer to ban abroad shipments was not in perpetuity and might be revised, senior authorities officers informed a press convention.

World patrons have been banking on provides from the world’s second-biggest wheat producer after exports from the Black Sea area plunged following Russia’s Feb. 24 invasion of Ukraine. Earlier than the ban, India had aimed to ship a report 10 million tonnes this yr.

The officers added that there was no dramatic fall in wheat output this yr, however unregulated exports had led to an increase in native costs.

“We do not need wheat commerce to occur in an unregulated method or hoarding to occur,” commerce secretary BVR Subrahmanyam informed reporters in New Delhi.

Though not one of many world’s prime wheat exporters, India’s ban may drive world costs to new peaks given already tight provide, hitting poor shoppers in Asia and Africa notably onerous.

“The ban is surprising,” a Mumbai-based seller with a world buying and selling agency mentioned. “We have been anticipating curbs on exports after two to 3 months, nevertheless it looks as if the inflation numbers modified the federal government’s thoughts.”

Rising meals and power costs pushed India’s annual retail inflation close to an eight-year excessive in April, strengthening expectations that the central financial institution would elevate rates of interest extra aggressively.

Wheat costs in India have risen to report highs, in some spot markets hitting 25,000 rupees ($320) per tonne, nicely above the federal government’s minimal help worth of 20,150 rupees.

Rising gas, labour, transportation and packaging prices are additionally boosting the worth of wheat flour in India.

“It was not wheat alone. The rise in total costs raised issues about inflation and that’s why the federal government needed to ban wheat exports,” mentioned one other senior authorities official who requested to not be named as discussions about export curbs have been personal. “For us, it’s abundance of warning.”

SMALLER CROP

India this week outlined its report export goal for the fiscal yr that began on April 1, saying it might ship commerce delegations to international locations similar to Morocco, Tunisia, Indonesia and the Philippines to discover methods to spice up shipments.

In February, the federal government forecast manufacturing of 111.32 million tonnes, the sixth straight report crop, nevertheless it lower the forecast to 105 million tonnes in Might.

A spike in temperatures in mid-March means the crop may as an alternative be round 100 million tonnes and even decrease, mentioned a New Delhi-based seller with a world buying and selling agency.

“The federal government’s procurement has fallen greater than 50%. Spot markets are getting far decrease provides than final yr. All these items are indicating decrease crop,” the seller mentioned.

Cashing in on a rally in world wheat costs after Russia invaded Ukraine, India exported a report 7 million tonnes of wheat within the fiscal yr to March, up greater than 250% from the earlier yr.

“The rise in wheat worth was slightly average, and Indian costs are nonetheless considerably decrease than world costs,” mentioned Rajesh Paharia Jain, a New Delhi-based dealer.

“Wheat costs in some elements of the nation had jumped to the present degree even final yr, so the transfer to ban export is nothing however a knee-jerk response.”

Regardless of a drop in manufacturing and authorities purchases by the state-run Meals Company of India (FCI), India may have shipped at the least 10 million tonnes of wheat this fiscal yr, Jain mentioned.

The FCI has to date purchased a little bit over 19 million tonnes of wheat from home farmers, in opposition to final yr’s whole purchases of a report 43.34 million tonnes. It buys grain from native farmers to run a meals welfare programme for the poor.

In contrast to earlier years, farmers have most well-liked to promote wheat to personal merchants, who supplied higher costs than the federal government’s mounted price.

In April, India exported a report 1.4 million tonnes of wheat and offers have been already signed to export round 1.5 million tonnes in Might.

“The Indian ban will raise world wheat costs. Proper now there isn’t any huge provider available in the market,” one other seller mentioned.

($1 = 77.4700 Indian rupees)

(Reporting by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi; Extra reporting by Nupur Anand; Enhancing by William Mallard, Simon Cameron-Moore and Mike Harrison)