Indian Wheat Prices Hit Record High Despite Export Ban

Despite a ban on exports, Indian wheat prices jumped to a record high, owing to strong demand and dwindling supply from a crop damaged by a heatwave. The price increase has reduced the chances of India supplying significant amounts of wheat under government-to-government agreements with countries struggling to secure shipments due to the disruption caused by Ukraine's war.

"The majority of farmers have sold their crop. Despite the fact that demand is high, there are few available supplies,” as per a trader based in Indore. On Wednesday, local wheat prices reached a new high of 23,547 rupees per tonne. This was up nearly 12% from recent lows following the government's surprise export ban on May 14.

According to a Mumbai-based dealer with a global trading firm, supplies in grain markets were much lower this year than normal, indicating that 2022 production had dropped far more than the government had estimated.

"The government's estimate of 106.41 million tonnes is far from accurate. Supplies indicate production of around 95 million tonnes,” he stated. The Foreign Agricultural Service of the United States Department of Agriculture estimates production at 99 million tonnes.

In 2021, India, the world's second-largest wheat producer, harvested 109.59 million tonnes. Because of a heatwave in March and April, the government predicted lower output this year. Lower supplies are reflected in government wheat procurement, which is down 57 percent this year compared to the same period in 2021, at 18.8 million tonnes.

According to a New Delhi-based dealer with a global trading firm, the government will have a little stockpile to intervene in the market until new-season supplies become available in March 2023.

"Supplies are running low. India may allow small-scale exports to Sri Lanka or Nepal, but large-scale shipments are unlikely under government-to-government agreements," said the dealer.

When New Delhi prohibited wheat exports, it stated that it would permit overseas shipments to countries that requested supplies "to meet their food security needs.” In the second quarter, India exported 3.5 million tonnes of wheat, primarily to Bangladesh, Nepal, Indonesia, the Philippines, and Sri Lanka, up from 1.1 million tonnes the previous year.