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World

India’s wheat was easing the food crisis. Then it banned exports

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“We already have enough food for our people but our farmers seem to have made arrangements to feed the world,” Modi said in April. “We are ready to send the relief from tomorrow itself.”
The world’s second biggest producer of wheat after China was already walking the talk. In the 12 months to March, India cashed in on soaring global prices, exporting a record 7 million metric tons of the grain. That was up more than 250% on the previous year’s volumes. It had also set record export targets for the coming year.
Now, those lofty goals have been abandoned and wheat exports banned as life-threatening heat waves in South Asia stunt output and push local prices to record highs.
The move shocked international markets on Monday — all the more since it came just days after India assured the world that the unprecedented heatwave wouldn’t impact its export plans. Global wheat prices spiked 6%, with futures trading in Chicago hitting $12.4 per bushel, the highest price in two months. Wheat futures dropped back a little Tuesday but are still up nearly 50% since the war started.
While India is a huge wheat producer — even this year the country is expected to produce over 100 million metric tons — most of the grain is used to feed its population of 1.3 billion. By the government’s own admission, the country is “not among the top 10 wheat exporters.”

But the alarm its export ban caused underscores the fragility of global food supplies.

How did we get here?

Russia’s invasion of Ukraine has contributed to a historic shock to commodity markets that will keep global prices high through the end of 2024, the World Bank said last month. Food prices are expected to soar by 22.9% this year, driven by a 40% rise in wheat prices, it added.
That’s because Ukraine and Russia together account for about 14% of global wheat production, and about 29% of all wheat exports. Vital shipments of agricultural exports, including an estimated 20 million tons of grain, are stuck in Ukraine because Odessa and its other Black Sea ports have been blockaded by Russian forces.

Ukraine is among the top five global exporters for a variety of key agricultural products, including corn, wheat and barley, according to the US Department of Agriculture. It’s also the leading exporter of both sunflower oil and meal.

But the food situation was strained even before the fighting started in Europe. Snarled supply chains and unpredictable weather patterns — often the result of climate change — had already pushed food prices to their highest level in about a decade. Affordability was also an issue after the pandemic left millions out of work.

The number of people on the edge of famine has jumped to 44 million from 27 million in 2019, the UN’s World Food Programme said in March.

After Modi’s promise, many vulnerable countries were banking on supplies from India.

“Indian wheat exports are especially important this year on the back of Russia-Ukraine crisis,” Oscar Tjakra, senior grains and oilseeds analyst at Rabobank, told CNN Business.

The “ban will reduce the availability of global wheat for exports in 2022 and will provide support to global wheat prices,” he added.

New Delhi’s policy U-turn on wheat has already been met with criticism from members of the G7, an organization of some of the world’s largest economies.

On Monday, Ambassador Linda Thomas-Greenfield, the US Representative to the United Nations, said that she hoped Indian authorities “would reconsider that position.”

“We’re encouraging countries not to restrict exports because we think any restrictions on exports will exacerbate the food shortages,” she said at a press briefing in New York.

Rising food protectionism

India has responded by maintaining that the curbs are essential for its own food security and also for keeping prices in check. Annual inflation in Asia’s third largest economy hit its highest level in nearly eight years in April, a development some traders say triggered the export ban.

The government also said that restrictions do not apply “in cases where prior commitments have been made by private traders,” and to countries that request supplies “to meet their food security needs.”

According to Tjakra, these exceptions should be considered “good news,” but they do make it harder to assess the impact the prohibition will have on global trade.

The “severity of impact” of the ban “will still depend on volumes of India wheat exports that are still allowed at the government level and volumes of wheat production from other global wheat producers,” he added.

Some analysts in India say that allowing unrestricted exports was a bad idea in the first place.

“We don’t know what will happen to the climate in India,” Devinder Sharma, an India-based agriculture policy expert, told CNN Business.

India is among the countries expected to be worst affected by the impacts of the climate crisis, according to the UN’s climate change authority, the Intergovernmental Panel on Climate Change (IPCC).

If crops are ruined because of unpredictable weather, India could run short of food, and be left “standing with a begging bowl,” Sharma added.

India is not the only country looking inward and putting curbs on agricultural exports.

In April, Indonesia began restricting exports of palm oil, a common ingredient found in many of the world’s food, cosmetics and household items. It’s the world’s top producer of the product.
Just a month earlier, Egypt had banned exports of key staples such as wheat, flour, lentils and beans amid growing concerns over food reserves in the Arab world’s most populous state.

“With inflation already on the rise in Asia, risks are skewed towards more food protectionism, but these measures could end up exacerbating food price pressures globally,” Nomura analyst Sonal Varma said in a note on Saturday.

She added that the impact of India’s wheat export ban will “be felt disproportionately by low income developing countries.”

Bangladesh is India’s top wheat export destination, followed by Sri Lanka, the United Arab Emirates, Indonesia, Yemen, the Philippines and Nepal, Nomura said.

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World

India, second-largest wheat producer, bans exports amid food supply concerns

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India, the second-largest producer of wheat, has banned exports of the commodity, due to a risk to its food security. 

A Friday notice in the government gazette signed by Santosh Kumar Sarangi, the Director General of Foreign Trade, said that a “sudden spike” in the global prices of wheat was putting India, neighboring and other vulnerable countries at risk. 

RECORD FOOD PRICES DECREASE SLIGHTLY IN APRIL: UN AGENCY

The export of wheat will be allowed in case of shipments where an Irrevocable Letter of Credit (ICLC) had been issued on or before the date of the notice and “on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their governments.” 

FILE- A farmer carries wheat crop after harvest at Ganeshpur village, in Sonbhadra district of Uttar Pradesh state, India, Sunday, April 11, 2021.  (AP Photo/Rajesh Kumar Singh, File / AP Newsroom)

“The export policy of wheat against the above mentioned HS codes is ‘Prohibited’ with immediate effect except for shipments fulfilling the conditions mentioned in [paragraph 2 above which will be allowed as per the procedure outlined in Para 1.05 (b) of the Foreign Trade Policy, 2015-2020,” the director wrote. 

Even though it is the world’s second-largest producer of wheat, India consumes most of the wheat it produces. 

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The nation had set a goal of exporting 10 million tons from 2022 to 2023, much of which would have gone to other developing countries like Indonesia, the Philippines and Thailand.

India’s wheat harvest has suffered from record-breaking heat and its own stocks have been strained by the distribution of free grain during the COVID-19 pandemic. 

FILE – A laborer seals sacks filled with wheat in Gurdaspur, in the northern Indian state of Punjab, April 30, 2014.  (AP Photo/Channi Anand, File / AP Newsroom)

Other countries are also grappling with poor harvests that hinder their ability to help offset shortfalls due to Russia’s war in Ukraine.

Before the invasion, Ukraine and Russia accounted for a third of global wheat and barley exports.

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Global wheat prices have increased by more than 40% since the beginning of the year.

Earlier this month, the United Nations’ Food and Agriculture Organization (FAO) slightly cut its projection of world wheat production in 2022 to 782 million tonnes, from 784 million last month.

The Associated Press contributed to this report.

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World

India bans wheat exports as heat wave hurts crop, domestic prices soar

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A combine deposits harvested wheat in a tractor trolley at a field on the outskirts of Ahmedabad, India, March 16, 2022. REUTERS/Amit Dave

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  • Ban could push global wheat prices to new peaks
  • India was aiming to export 10 mln T wheat before ban
  • Heat wave dents size of wheat crop, lifts prices
  • Govt buying falls more than 50% from year ago

MUMBAI, May 14 (Reuters) – India banned wheat exports on Saturday, just days after saying it was targeting record shipments this year, as a scorching heat wave curtailed output and domestic prices soared to an all-time high.

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

Global buyers were banking on supplies from the world’s second-biggest wheat producer after exports from the Black Sea region plunged following Russia’s Feb. 24 invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tonnes this year. read more

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Although it is not one of the world’s top wheat exporters, India’s ban could drive global prices to new peaks given already tight supply, hitting poor consumers in Asia and Africa particularly hard.

“The ban is shocking,” a Mumbai-based dealer with a global trading firm said. “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 near an eight-year high in April, strengthening expectations that the central bank would raise interest rates more aggressively. read more

Wheat prices in India have risen to record highs, in some spot markets hitting 25,000 rupees ($320) per tonne, well above the government’s minimum support price of 20,150 rupees.

Rising fuel, labour, transportation and packaging costs are also boosting the price of wheat flour in India.

“It was not wheat alone. The rise in overall prices raised concerns about inflation and that’s why the government had to ban wheat exports,” said a senior government official who asked not to be named as discussions about export curbs were private.

“For us, it’s abundance of caution,” he said.

SMALLER CROP

India just this week outlined its record export target for the fiscal year that started on April 1, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments.

In February the government forecast production of 111.32 million tonnes, the sixth straight record crop, but it cut the forecast to 105 million tonnes in May. read more

A spike in temperatures in mid-March means the crop could instead be around 100 million tonnes or even lower, said a New Delhi-based dealer with a global trading firm.

“The government’s procurement has fallen more than 50%. Spot markets are getting far lower supplies than last year. All these things are indicating lower crop,” the dealer said.

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% from the previous year.

“The rise in wheat price was rather moderate, and Indian prices are still substantially lower than global prices,” said Rajesh Paharia Jain, a New Delhi-based trader.

“In fact, wheat prices in some parts of the country had jumped to the current level even last year, so the move to ban export is nothing but a knee-jerk reaction.”

Despite a drop in production and government purchases by the state-run Food Corporation of India (FCI), India could have shipped at least 10 million tonnes of wheat this fiscal year, Jain said.

The FCI has so far bought a little over 19 million tonnes of wheat from domestic farmers, against last year’s total purchases of a record 43.34 million tonnes. The FCI buys grain from local farmers to run a food welfare programme for the poor.

Unlike previous years, farmers have preferred to sell wheat to private traders, who offered better prices than the government’s fixed rate.

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. read more

“The Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” another dealer said.

($1 = 77.4700 Indian rupees)

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Reporting by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi; Editing by William Mallard & Simon Cameron-Moore

Our Standards: The Thomson Reuters Trust Principles.

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Business

Charts suggest corn and wheat futures could continue to rise due to Russia-Ukraine war, Cramer says

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CNBC’s Jim Cramer on Tuesday said corn and wheat prices could continue to rise due to Russia’s invasion of Ukraine, leaning on analysis from Carley Garner, senior commodity market strategist at DeCarley Trading.

“The charts, as interpreted by Carley Garner, suggest that both wheat and corn prices are headed higher here. Maybe much higher. And that is the last thing we want to see, but we might have to get used to it,” the “Mad Money” host said.

Cramer said that Ukraine and Russia account for a third for the world’s wheat production, and while this year’s crop was planted before war broke out between the two countries, harvesting and shipping could be a challenge due to high energy costs and safety concerns.

Wheat futures 

Current prices are the highest they’ve been since 2008, when a slew of factors including high oil prices and unusually dry weather in the United States led wheat to leap to $13 a bushel from the $3 to $6 it hovered around for decades prior, Cramer said.

Garner believes this jump was “even faster and more disorderly,” Cramer said. Additionally, because future exchanges have price limits on how much a commodity can move in a session, wheat can be “locked limit-up,” which means the price has moved to its limit in a day, and short-sellers who don’t want to sell at the limit price are held in that position until the next day.

This phenomenon happened during the week after the Russia-Ukraine war began, which Garner believes helped drive up wheat prices to $13.60 with little trading.

Here’s a weekly chart of wheat futures and the Commodity Futures Trading Commission’s commitments of traders data. The COT report shows the net positions of small speculators, large speculators and commercial hedgers.

Here, Garner sees that because of locked limit-up trading sessions, money managers are net long by only 12,000 contracts, Cramer said. In the past, they could go up to 50,000, according to Garner, which means that “if institutional money managers want to bet on wheat here, they’ve still got a ton of dry powder,” Cramer said.

Garner believes prices are going to continue to increase, Cramer said.

Here is the daily chart of the May wheat futures:

After prices peaked on March 8 and underwent six limit-up moves, wheat futures declined sharply, according to Garner. But prices still stayed above wheat’s 20-day moving average, while the Relative Strength Index, a momentum indicator, pulled back from overbought territory while staying positive. This means wheat has “got more room to run,” Cramer said.

“As long as it holds above its floor of support at $10.30 a bushel, which is down roughly 90 cents from here, Garner believes wheat can make another run at its highs over the coming weeks or months,” Cramer said.

Corn futures

Although Ukraine accounts for 4% of the global output of corn, “no trader wants to sell corn when the wheat board is lighting up,” Cramer said. He added that corn was able to rally because corn-based ethanol is currently cheaper than oil, which has surged in price in recent weeks.

Here is the monthly chart of the May corn futures:

Garner believes the corn rally could end soon but still be hard-hitting, said Cramer, adding that if corn futures surpass the price ceiling of resistance around $7.70, it could approach record levels of $8.50.

“She doesn’t expect corn to burst through that level, but if it somehow manages to keep roaring, then she doesn’t see any more resistance until $10.50. That would be a new record. If corn gets to that level, it means we’re dealing with an insane level of inflation,” Cramer said.

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