Rajendra Jadhav and Mayank Bhardwaj, Nigam Praty

MUMBAI, Reuters – India banned the export of wheat on Saturday after claiming it wanted record shipments. This was because of a scorching heat wave that curtailed production and made domestic prices record highs.

It said that it will allow countries to request exports “to fulfill their food security needs” if they have already received letters of credit.

According to senior officials from the government, this ban on exports was not indefinite and can be reversed.

After the February 24th invasion of Ukraine by Russia, global buyers were banking upon supplies from India’s second largest wheat producer. India was aiming to send a record 10,000,000 tonnes of wheat this year before the ban.

They stated that although there wasn’t a dramatic drop in wheat production this year due to unregulated exports, local prices rose.

BVR Subrahmanyam, commerce secretary at BVR Group of Companies told reporters in New Delhi, “We don’t want wheat trade in an unregulated way or to be hoarded to happen.”

Although India is not the top exporter of wheat, its ban could cause global prices to soar given tight supplies. This would be especially detrimental for poor Asian and African consumers.

According to a Mumbai dealer working for a global trading platform, “The ban on exports is quite shocking.” We were hoping for curbs on imports in two to three more months. However, it seems that the inflation numbers changed their minds.

In April, India saw its annual retail inflation rise to an 8-year high. This boosted expectations of a more aggressive central bank raising interest rates.

India’s wheat market prices rose to new records, hitting as high as 25,000 rupees ($320/tonne in spot markets), well over the 20150 rupee minimum support price.

India’s wheat flour prices are rising due to increased fuel costs, transport, packaging, and labour costs.

“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.”

A SMALLER COOP

India has announced its record export targets for the fiscal year beginning April 1st. It stated that it would be sending trade delegations abroad to Morocco, Indonesia, Tunisia, and Indonesia in order to find ways to improve shipments.

Although the government was expecting a record-breaking production in February with 111.32M tonnes of product, its forecast for May fell to 105M tonnes.

An increase in temperatures between March and April could result in a crop of around 100m tonnes, or less. This was according to New Delhi’s dealer in global trading.

“The government has had its procurement fall by more than half. Spot markets see a drop in supplies compared to last year. “All these indicators are indicating lower crop,” the dealer stated.

India exported an unprecedented 7 million tonnes of global wheat during the financial year ending March. That’s more than 25% increase on the previous fiscal year.

Rajesh Paharia Jain from New Delhi, said that while the wheat price rose moderately, Indian prices remain substantially below global levels.

“The wheat prices in certain parts of the country have risen to their current levels even last year so export ban is a reactionary move.”

Jain stated that India could have exported at least 10,000,000 tonnes of wheat in fiscal 2011, despite a decline in production and purchases made by government agencies such as the Food Corporation of India (FCI).

The FCI has so far bought a little over 19 million tonnes of wheat from domestic farmers, against last year’s total purchases of a record 43.34 million tonnes. The FCI buys wheat from farmers in order to support a food assistance program for the poor.

Contrary to previous years, wheat farmers prefer to sell it to private traders who offer better rates than the fixed government rate.

India exported record-breaking 1.4 Million tonnes of wheat in April. Deals were also signed for exports to India around 1.5million tonnes by May.

The Indian ban on wheat imports will boost global wheat prices. “Right now, there’s no large supplier to the market,” another dealer claimed.

($1 equals 77.4700 Indian Rupees).