India has banned wheat exports as a scorching heat wave curtailed output and domestic prices soared to an all-time high.
The Indian 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”.
Global buyers were banking on supplies from the world’s second-biggest wheat producer after exports from the Black Sea region plunged following Russia’s invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tonnes this year.
India’s ban could drive global prices to new peaks given already tight supply, hitting poor consumers in Asia and Africa particularly hard.
“The ban is shocking,” a Mumbai-based 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 government’s mind.”
Rising food and energy prices pushed India’s annual retail inflation near an eight-year high in April, strengthening expectations that the central bank would raise interest rates more aggressively.
Wheat prices in India have risen to record highs, with higher fuel, labour, transportation and packaging costs boosting the price of wheat flour.
In 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.
A spike in temperatures in mid-March means the crop could instead be around 100 million tonnes or even lower, said a New Delhi-based dealer with a global trading firm.
Cashing 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 per cent from the previous year.
In 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.
“The Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” another dealer said.