Rajendra Jadhav and Mayank Bhardwaj, Nigam Praty

MUMBAI, Reuters -India has banned the export of wheat on Saturday after claiming it is targeting record shipments. This was because of a scorching heatwave that curtailed production and caused domestic prices to hit a new record.

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 permanent. It could be modified at any time.

The supply of supplies from India, the world’s second-largest wheat producer was a key factor for global buyers. This is after the collapse in exports from Russia’s Black Sea region. India had previously aimed at shipping a record 10,000,000 tonnes of wheat this year, prior to 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 that they don’t want the unregulated or hoarding of wheat to take place.

India is not the top exporter of wheat in the world, but its ban could cause global price rises due to 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 expected export curbs to be in place within two to three months. However, it seems that the inflation numbers have changed the mind of the government.”

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 prices have reached record levels, with some spot markets reaching 25,000 Rupees ($320/tonne) in certain spots. This is well beyond the minimum support price set by government at 20,150 rupees.

India is also seeing rising fuel, labor, transportation, and packaging prices that are driving up the cost of wheat flour.

“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 announced this week its record export goal for fiscal year which began on April 1. It said it will send trade delegations from India to other countries like Indonesia, Morocco, Tunisia and Indonesia to look at ways to increase 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.

According to a New Delhi dealer who works for a global trading company, a spike in temperature in March could mean that the crop will be 100 million tonnes higher or lower.

“The government has had its procurement fall by more than half. Spot markets have much lower supply than they did last year. These are all indicators of a lower crop,” said the dealer.

India, benefiting from a rise in global wheat prices following Russia’s invasion of Ukraine, exported 7 million tonnes more wheat than the prior year. This is a 250% increase over the previous year.

Rajesh Paharia Jain (a New Delhi-based trader) stated that the rise in wheat prices was moderate and Indian prices were still significantly lower than global.

“Wheat prices had increased to the level they are now even last year in parts of the nation, therefore the decision to ban exports is a reactionary one.”

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 = 77.4700 Indian Rs.