By Pratik Parija / Bloomberg
India has banned wheat exports the world has relied on to ease supply constraints sparked by war in Ukraine, saying the country’s food security is at risk.
Exports would still be allowed to countries that need wheat for their food security needs and based on requests from their governments, India’s Directorate General of Foreign Trade said in a notification dated Friday.
All other new shipments would be banned with immediate effect.
The decision to halt wheat exports highlights India’s concerns about high inflation, adding to a wave of food protectionism since the start of the war. Governments around the world are looking to secure local food supplies with soaring agricultural prices. Indonesia halted palm oil exports, while Serbia and Kazakhstan imposed quotas on grain shipments.
Limiting exports would be a blow to India’s ambition to take advantage of the global wheat recovery after the war disrupted trade flows out of the Black Sea breadbasket region. Importing countries have looked to India for supplies, with top buyer Egypt recently approving the South Asian nation as an origin for wheat imports.
“We now have an environment with another supplier removed from contention in global trade flows,” said Andrew Whitelaw, grain analyst at Melbourne-based Thomas Elder Markets, adding that he was skeptical of the expected high volumes of India.
“The world is starting to run out of wheat,” Whitelaw said.
Currently, US winter wheat is in poor shape, supplies from France are drying up and exports from Ukraine are stalled.
Earlier this month, Bloomberg News reported that a record heat wave had damaged wheat yields across the South Asian country, prompting the government to consider export restrictions.
India’s Ministry of Consumer, Food and Utilities has said it sees no need to control exports, even though the government has cut estimates of India’s wheat production.
Shipments with irrevocable letters of credit that have already been issued will still be permitted, according to the latest notification. Traders have pledged to export 4 million tonnes so far in 2022-23, the food ministry announced on May 4.
After Egypt, Turkey has also given its approval to import corn from India, she added.
After the war hampered logistics in the Black Sea region, which accounts for about a quarter of all wheat trade, India tried to fill the void. The country aimed to export a record 10 million tons in 2022-2023.
However, his domestic challenges have become more acute in recent weeks. Hundreds of hectares of wheat crops were damaged in India’s hottest March on record, leading to potential yield declines of up to 50% in some pockets of the country, according to a Bloomberg survey.
This has raised concerns for the domestic market, with millions of people depending on agriculture as their main livelihood and source of food.
The Indian government said wheat purchases for its food aid programme, the world’s largest, would be less than half of last year’s level.
The export ban would likely hurt farmers and traders who have stockpiled grain in anticipation of higher prices.
India’s control of wheat exports – given uncertainties related to crop size, grain supply program, war, high fertilizer costs and extreme weather conditions in other countries growing – is a logical move to ensure domestic availability and manage inflation, said Siraj Chaudhry, managing director and chief executive of National Commodities Management Services Ltd, a warehousing and trading company.
However, an approach with measures such as a minimum export price and quantitative restrictions would have been preferable, as a sudden ban poses challenges to trade, affects the reliability of Indian exporters and affects the earning potential of farmers, Chaudhry said.
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