Explainer-What Indias u-turn on wheat exports means for world markets

div classBodysc17zpet90 cdBBJodivpSINGAPORE Reuters – Indias ban on wheat exports has delivered a fresh blow to world markets already reeling from tight supplies due to output issues in traditional export powerhouses Canada, Europe and Australia and snarled supply lines in the wartorn Black Sea area.p

pBenchmark wheat futures in Chicago jumped by their 6 limit on Monday as markets reacted to the ban announced over the weekend, igniting alarm among trading firms and importers who had been banking on millions of tonnes of Indian wheat being available for shipment over the coming months. [GRA]pdivdivdiv classBodysc17zpet90 cdBBJodiv

pBelow is a brief explainer on whats at stake for the world grain markets. p

pWHY DID INDIA BAN EXPORTS？p

pIndia was initially eyeing as much as 12 million tonnes of wheat exports in 202223, significantly higher than last years record exports of 7.2 million tonnes.p

pAfter harvesting five consecutive record crops, New Delhi was hoping a sixth crop would be even higher at 111.32 million tonnes. p

pBut a heatwave during a crucial crop development phase dented yields, forcing the government to cut its output estimate to 105 million tonnes.p

pLower output coupled with strong export demand then pushed local prices higher, often above the governments fixed procurement price. p

pThat prompted farmers to sell wheat privately instead of to the state, whose purchases to run welfare schemes slumped due to tight supplies.p

pHOW IMPORTANT IS INDIA TO WORLD MARKETS？p

pIndia is the worlds second largest wheat producer behind China, but rarely exports much grain due to high governmentsubsidized domestic prices and massive domestic food needs. p

pHowever, improved seed selection and farm management over the past decade had put the country on course for a new record crop this year, opening the door to an export boom just as global crop markets really needed extra supplies.p

pIndian wheat exporters had eyed sales of up to 12 million tonnes in the 202223 season, which would have placed India as the eight largest exporter, not far behind Canada with a projected 15.5 million tonnes. p

pTop destinations for Indian exports included Bangladesh, Indonesia, Nepal and Turkey, and top global buyer Egypt recently agreed to make a first ever purchase of Indian wheat as Cairo tried to replace lost shipments from the Black Sea.p

pWHO ARE OTHER KEY WHEAT EXPORTERS？p

pRussia, Europe, the United States and Canada are traditionally the top global wheat exporters, and accounted for roughly 60 of world wheat exports from 2015 through 2020, according to the U.S. Department of Agriculture.p

pHowever, each has faced significant wheat crop setbacks in recent seasons, with their collective export share dropping to only 50.7 in the 202122 season, mainly due to drought in North America and Europe.p

pThis year‘s export tonnage had been expected to recover until Russia’s invasion of Ukraine – a fellow major wheat producer and supplier – severed shipments from that region and sparked a scramble by major buyers to find replacement supplies.p

pAustralia is slated to be the third largest wheat exporter this year, but suffered some quality deterioration in certain areas just before harvest and has already sealed deals on a majority of exportable volumes.p

pWHO ARE THE TOP IMPORTERS？p

pOver the last three seasons, Egypt, Indonesia, China, Turkey and Algeria have been the top five wheat importers. Other major importers include Bangladesh, Morocco, Nigeria and Brazil.p

pSince Russia‘s invasion of Ukraine threatened to block wheat supplies from the Black Sea, big buyers in Africa and the Middle East have struggled to find replacements, since most alternative exporters do not begin this year’s harvest until June.p

pThe exception this year had been India, which wrapped up its main wheat harvest this month and so had a rare abundance of fresh wheat inventories.p

pWHAT HAPPENS NOW TO INDIAS WHEAT？p

pThe sudden ban on exports means a majority of the new crop will now stay within India.p

pTrading firms that have already secured letters of credit to export grain will be allowed to proceed with those sales. p

pRemaining segments of the crop that had been expected to be exported will now need to be sold or stored domestically.p

pLocal wheat markets have already started to react to the ban, with prices falling up to 2 over the weekend in various spot markets.p

p

pp Reporting by Gavin Maguire in Singapore and Rajendra Jadhav in Mumbai Editing by Jan Harveyp

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