India bans wheat exports to deepen global food crisis

Hacker News - Sat May 14 06:38

The Indian government has blocked all exports of wheat with immediate effect in a move that could intensify the global shortage exacerbated by the war in Ukraine.

India, the world's second-largest producer of wheat, was expected to bolster supply badly depleted by Russia's war in Ukraine, which has caused exports from the Black Sea region to plummet and the UN to warn of a global hunger crisis.

A scorching heatwave has curtailed wheat output in India and domestic prices have soared to an all-time high.

The government said it would still allow exports backed by already issued letters of credit and to those countries that request supplies "to meet their food security needs".

The ban could drive up global prices to new peaks and hit poor consumers in Asia and Africa.

Prior to the ban, India had aimed to ship a record 10 million tonnes this year.

"The ban is shocking," a Mumbai-based dealer with a global trading firm told Reuters. "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 up towards an eight-year high in April, strengthening economists' view that the central bank would have to raise interest rates more aggressively to curb prices.

Wheat prices in India have risen to a record high, in some places as high as 25,000 rupees (£263) per tonne, way above the government's fixed minimum support price of 20,150 rupees.

Earlier this week, India outlined its record export target for this fiscal year, adding it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and Philippines to explore ways to further boost shipments.

But a sharp and sudden rise in temperatures in mid-March means the crop size could be smaller than expected at about 100 million tonnes or even lower, a New Delhi-based dealer with a global trading firm told Reuters. 

The government had estimated production would hit an all-time high of 111.32 million tonnes.

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.

In 2020, Ukraine was the world’s fifth largest exporter of wheat, with low-income countries such as Bangladesh and Lebanon among the beneficiaries, but since the invasion Russian forces have blockaded grain exports from Ukraine’s ports.