Ruckus In Global Wheat Market After Indian Export Ban
The Global wheat prices registered a record hike up to six per cent following the sudden ban on export of wheat from India. After the invasion by Russia into Ukraine (both countries contribute to 30 per cent of global wheat supply), the world was banking on India for the wheat supplies and the ban has sent a shockwave across the globe.
Following the ban, the wheat price in Europe surged to 435 euros ( INR 35,329.41) per tonne (100 kg) at the benchmark Euronext market, up from the previous record of 422 euros (INR 34273.59), an AFP report said.
The supply has been hit after Ukraine’s exports severely hampered because the war which has forced it to close its ports, while Russia's exports have been hit by Western sanctions.
According to a report, traders holding that wheat face heavy losses because they will have to cancel their export deals and resell onto a weakening domestic market.
The Indian export ban following the heat wave condition in the country that has cut the harvest prospects and pushed domestic prices to a record high, also comes amid output issues in traditional export powerhouses Canada, Europe and Australia.
Traders say the ban could drive global prices to new record peaks, hitting poor consumers in Asia and Africa particularly hard.
According to the Indian government’s Department of Commerce portal, the country exported 66.41 lakh tonnes of wheat in the first 11 months of financial year 2021-22. This data conforms with the latest US Department of Agriculture’s May 2022 report, which estimates wheat exports from India in the 12 months from July 2021 to June 2022 at 10 million metric tons.
Meanwhile, the Group of Seven countries (G-7) has slammed the Indian government for imposing restrictions on export. While in meeting, Germany, German Agriculture Minister Cem Ozdemir said that decision will further “worsen the crisis.”
However, defending itself, India said that the ban was vital in view of the rising price of the wheat in India. Retail inflation has been ruling over 6 per cent for four straight months in calendar year 2022, with the print for April soaring to 7.79 per cent, much higher than the upper band of RBI inflation target of six per cent. In the Consumer Price Index, wheat from Public Distribution System (PDS) has a weight of 0.17 and wheat from other sources has a weight of 2.56.
Nomura Global Markets Research said that export ban will affect low income developing countries as most economies depend on the imported wheat for consumption and they are at risk from higher wheat prices.
According to the report, Bangladesh is on the top of export destination hence, it will feel the burnt. The country in 2021-2022 imported 38.04 lakh tonnes for wheat.
While Sri Lanka imported 5.48 lakh tonnes followed by UAE 4.24 lakh tonnes, Indonesia 3.66 lakh tonnes, the Philippines 3.52 lakh tonnes and Nepal 2.90 lakh tonnes were the other big importers of Indian wheat.
According to the Indian government the ban serves the three purposes including maintaining the country’s food security, helping those in distress; if countries make a specific request, the Indian government will take a call, and India’s reliability as a supplier is being maintained by not reneging on any existing contract.