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

div classBodysc17zpet90 cdBBJodivpBy Rajendra Jadhav, Mayank Bhardwaj and Nigam Prustyp

pMUMBAI Reuters India banned wheat exports on Saturday days after saying it was targeting record shipments this year, as a scorching heat wave curtailed output and domestic prices hit a record high.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pThe government said it would still allow exports backed by already issued letters of credit and to countries that request supplies “to meet their food security needs”.p

pThe move to ban overseas shipments was not in perpetuity and could be revised, senior government officials told a press conference.p

pGlobal buyers were banking on supplies from the world‘s secondbiggest wheat producer after exports from the Black Sea region plunged following Russia’s Feb. 24 invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tonnes this year.p

pThe officials added that there was no dramatic fall in wheat output this year, but unregulated exports had led to a rise in local prices.p

p“We dont want wheat trade to happen in an unregulated manner or hoarding to happen,” commerce secretary BVR Subrahmanyam told reporters in New Delhi.p

pAlthough not one of the world‘s top wheat exporters, India’s ban could drive global prices to new peaks given already tight supply, hitting poor consumers in Asia and Africa particularly hard.p

p“The ban is shocking,” a Mumbaibased dealer with a global trading firm said. “We were expecting curbs on exports after two to three months, but it seems like the inflation numbers changed the governments mind.” p

pRising food and energy prices pushed Indias annual retail inflation near an eightyear high in April, strengthening expectations that the central bank would raise interest rates more aggressively.p

pWheat prices in India have risen to record highs, in some spot markets hitting 25,000 rupees 320 per tonne, well above the governments minimum support price of 20,150 rupees.p

pRising fuel, labour, transportation and packaging costs are also boosting the price of wheat flour in India.p

p“It was not wheat alone. The rise in overall prices raised concerns about inflation and that‘s why the government had to ban wheat exports,” said another senior government official who asked not to be named as discussions about export curbs were private. “For us, it’s abundance of caution.”p

pSMALLER CROPp

pIndia this week outlined its record export target for the fiscal year that started on April 1, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments.p

pIn February, the government forecast production of 111.32 million tonnes, the sixth straight record crop, but it cut the forecast to 105 million tonnes in May.p

pA spike in temperatures in midMarch means the crop could instead be around 100 million tonnes or even lower, said a New Delhibased dealer with a global trading firm. p

p“The governments procurement has fallen more than 50. Spot markets are getting far lower supplies than last year. All these things are indicating lower crop,” the dealer said.p

pCashing in on a rally in global wheat prices after Russia invaded Ukraine, India exported a record 7 million tonnes of wheat in the fiscal year to March, up more than 250 from the previous year.p

p“The rise in wheat price was rather moderate, and Indian prices are still substantially lower than global prices,” said Rajesh Paharia Jain, a New Delhibased trader.p

p“Wheat prices in some parts of the country had jumped to the current level even last year, so the move to ban export is nothing but a kneejerk reaction.”p

pDespite a drop in production and government purchases by the staterun Food Corporation of India FCI, India could have shipped at least 10 million tonnes of wheat this fiscal year, Jain said. p

pThe FCI has so far bought a little over 19 million tonnes of wheat from domestic farmers, against last years total purchases of a record 43.34 million tonnes. It buys grain from local farmers to run a food welfare programme for the poor. p

pUnlike previous years, farmers have preferred to sell wheat to private traders, who offered better prices than the governments fixed rate.p

pIn April, India exported a record 1.4 million tonnes of wheat and deals were already signed to export around 1.5 million tonnes in May.p

p“The Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” another dealer said.p

p1 77.4700 Indian rupeesp

p Reporting by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi Additional reporting by Nupur Anand Editing by William Mallard, Simon CameronMoore and Mike Harrisonp

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