SINGAPORE: India’s ban on wheat exports has delivered a fresh blow to world markets already reeling from tight supplies due to output issues in traditional export powerhouses Canada, Europe and Australia and snarled supply lines in the war-torn Black Sea area.

Benchmark wheat futures in Chicago jumped by their 6pc limit on Monday as markets reacted to the ban announced over the weekend, igniting alarm among trading firms and importers who had been banking on millions of tonnes of Indian wheat being available for shipment over the coming months.

Below is a brief explainer on what’s at stake for the world grain markets.

Why did India ban exports?

India was initially eyeing as much as 12 million tonnes of wheat exports in 2022/23, significantly higher than last year’s record exports of 7.2 million tonnes.

After harvesting five consecutive record crops, New Delhi was hoping a sixth crop would be even higher at 111.32 million tonnes.

But a heat-wave during a crucial crop development phase dented yields, forcing the government to cut its output estimate to 105 million tonnes.

Lower output coupled with strong export demand then pushed local prices higher, often above the government’s fixed procurement price.

That prompted farmers to sell wheat privately instead of to the state, whose purchases to run welfare schemes slumped due to tight supplies.

How important is India to world markets?

India is the world’s second largest wheat producer behind China, but rarely exports much grain due to high government-subsidised domestic prices and massive domestic food needs.

However, improved seed selection and farm management over the past decade had put the country on course for a new record crop this year, opening the door to an export boom just as global crop markets really needed extra supplies.

Indian wheat exporters had eyed sales of up to 12 million tonnes in the 2022/23 season, which would have placed India as the eight largest exporter, not far behind Canada with a projected 15.5 million tonnes.

Top destinations for Indian exports included Bangladesh, Indonesia, Nepal and Turkey, and top global buyer Egypt recently agreed to make a first ever purchase of Indian wheat as Cairo tried to replace lost shipments from the Black Sea.

Who are other key wheat exporters?

Russia, Europe, the United States and Canada are traditionally the top global wheat exporters, and accounted for roughly 60pc of world wheat exports from 2015 through 2020, according to the US Department of Agriculture.

However, each has faced significant wheat crop setbacks in recent seasons, with their collective export share dropping to only 50.7pc in the 2021-22 season, mainly due to drought in North America and Europe.

This year’s export tonnage had been expected to recover until Russia’s invasion of Ukraine — a fellow major wheat producer and supplier — severed shipments from that region and sparked a scramble by major buyers to find replacement supplies.

Australia is slated to be the third largest wheat exporter this year, but suffered some quality deterioration in certain areas just before harvest and has already sealed deals on a majority of exportable volumes.

Published in Dawn, May 17th, 2022

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