India’s Wheat Export Ban Will Further Tighten Global Supplies

India imposed a ban on wheat exports as of May 13, withdrawing a big supply volume from the markets at a time when supplies have already been dropping since Russia’s invasion of Ukraine. The Indian government made the decision to control rising domestic prices of the food grain. The ban excludes shipments with irrevocable letter of credit issued on or before May 13.

Following Russia’s invasion of Ukraine, a major chunk of grain supplies from the Black Sea region has been cut, leaving open a wide supply gap. Indian traders have been looking to bank on the situation earlier as they expected increased exports in the marketing year 2022-23 (April-March).

It is considered that as much as 2-3 million mt of wheat for the flour and feed industry is at stake.

Australia may be an alternative supplier, but supplies there are also tight and shipping slots are sold out for June-July shipments. Prices will likely rise when global futures trading resumes on May 16.

APW (Australian Premium White) Wheat FOB Australia and ASW (Australian Standard White) Wheat FOB Australia jumped to a two-month high, $20/mt up on the day to $440/mt and $410/mt respectively.

Australian exporters have also had to deal with supply chain logistics. Lack of truck drivers due to COVID and skill shortage coupled with a large export program has put a squeeze on Australia wheat markets.

The export ban came just a day after the Indian commerce ministry said the country has set a target to export a record 10 million mt of wheat in marketing year 2022-23 amid rising demand for the grain globally and likely record output.

In February, the Indian government estimated a wheat output at a record 111.3 million mt for 2022-23. However, the crop is now seen at around 105 million-106 million mt as severe heatwave led to moisture loss and shriveled grains.

As a result of smaller than expected crop this year and high demand from overseas, wheat prices in India had soared since early April. Prices of wheat in Indore, a key physical market, rose 60% on month to 26,000 rupees/mt ($335.5/mt) on May 13.

Rising prices of wheat, a staple food grain in India, spurred a sharp increase in the consumer price index in April. India’s prices of food items, which make nearly half of the index, rose 8.38% on year in April, compared with 7.68% in March.

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