Wheat prices jumped by the exchange limit after India’s move to restrict exports, exposing just how tight global supplies are after the war in Ukraine and threatening to drive up food prices even more.
The government plans to suspend overseas sales to manage its food security, a notification dated Friday said.
This drew criticism from the agriculture ministers of the G7 nations, who said that such measures would make the world’s crisis worse.
Photo: Reuters
Benchmark futures rose as much as 5.9 percent to US$12.47 for half a bushel in Chicago, the highest in two months. Prices have surged about 60 percent this year, increasing the cost of everything from bread to cakes and noodles.
The surprising thing is that India is not even a prominent exporter on the world stage. That it could have such a major effect underscores the bleak prospect for global wheat supplies. War has crippled Ukraine’s exports, and now droughts, floods and heat waves threaten crops in most major producers.
“If this ban occurred in a normal year, the impact would be minimal, but the loss of Ukraine volumes exacerbates the issues,” said Andrew Whitelaw, a grains analyst at Melbourne-based Thomas Elder Markets.
India’s decision to halt wheat exports came after a record-breaking heat wave parched the crop during a crucial period, spurring estimates of slumping yields.
India is to approve exports to countries that require wheat for food security needs and based on the requests of their governments. It is also to allow shipments for which irrevocable letters of credit have been issued.
Its supplies usually go to Bangladesh, Sri Lanka, the United Arab Emirates and Indonesia.
“Directing the wheat exports through government channels would not only ensure fulfilling the genuine needs of our neighbors and food-deficit countries, but also control inflationary expectations,” the Indian Ministry of Consumer Affairs, Food and Public Distribution said in a statement, adding that the country has adequate food stocks.
The move by India adds to a growing wave of food protectionism since the war in Ukraine started. Governments around the world are seeking to ensure local food supplies with agriculture prices surging. Indonesia has halted palm oil exports, while Serbia and Kazakhstan imposed quotas on grain shipments.
The export ban could be long-lasting, if global food prices remain elevated, Nomura Securities Inc said.
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