Market braces for chaotic trade after India bans wheat exports

India has banned wheat exports, a move that could push up food prices and exacerbate hunger in poor countries that depend on imports.

The Indian government said it was implementing a ban on overseas sales “to manage the country’s overall food security and support the needs of neighbouring and other vulnerable countries”.

However, it said it would still allow exports of products for which letters of credit had been issued and would consider sales to countries seeking to meet their food security needs.

The announcement is one of the latest protectionist measures Grain exporters acted after prices soared this year after Indian government officials denied they would halt wheat exports.

India has been filling the export supply gap in the international wheat market left by Ukraine after the Russian invasion, but in heat wave The country has been hit since March.

India took a U-turn this week after government data showed domestic inflation soaring to its highest level in eight years, with rising food prices worrying policymakers.

Traders expect chaos when the international wheat market opens early next week as the ban hits buyers looking for supplies. “It’s definitely a blockbuster,” said Swiss grain trader Swithun Still. “There will be panic when the wheat futures market opens,” he added.

India, one of the world’s largest wheat producers, had a bumper harvest last year, while some other major exporters, including Canada and Argentina, suffered from bad weather.

India’s wheat exports rose to a record above 7 million tonnes in the year to March as the war all but halted Ukrainian exports.

But sweltering March and April, with temperatures as high as 45C hitting much of India’s wheat belt, heightened concerns about the country’s domestic supplies. With several more weeks of heat expected ahead of the annual monsoon next month, the government recently cut its forecast for annual production through June by 5% to 105 million tonnes.

Forecast bar chart for the upcoming 2022-23 crop year (million tonnes) showing the world's top 10 wheat exporters

Wheat prices are at eye-popping levels due to supply problems caused by the war in Ukraine and droughts around the world.USDA forecast Global supplies for the upcoming crop year are set to fall for the first time in four years. “The USDA has made it clear that we are heading for a global food crisis,” said Rabobank analyst Carlos Mela. “The next 12 months will be very challenging.”

International benchmark Chicago wheat futures settled at $11.6725 a bushel, up 50 percent from the start of the year, while European wheat futures were at 410.75 euros a tonne, just below March’s all-time high.

India’s consumer price index rose 7.8% in April from a year earlier, the highest level since 2014, according to data released on Thursday.

Fears of rapid price rise prompt RBI raise interest rates Didn’t expect this month to be the first time in four years.

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