India banned wheat exports on Saturday after saying it was aiming for record deliveries this year as heat cut production and domestic prices reached record highs.

The government has said it will continue to allow exports backed by credentials already issued to countries requesting supplies “to meet their food security needs.”

The ban on supplies abroad has not been in effect forever and may be reconsidered, senior government officials told a news conference.

World buyers were counting on supplies from the world’s second-largest wheat producer after exports from the Black Sea region fell after Russia’s invasion of Ukraine on February 24. Prior to the ban, India sought to ship a record 10 million tonnes this year.

Officials added that there has been no sharp drop in wheat production this year, but unregulated exports have led to rising local prices.

“We do not want the wheat trade to take place in an unregulated way or to accumulate,” BVR Trade Secretary Subramania told reporters in New Delhi.

Although India is not one of the world’s leading exporters of wheat, India’s ban could lead to new world price peaks given the already limited supply, particularly hitting poor consumers in Asia and Africa.

“The ban is shocking,” said a dealer from a global trading firm in Mumbai. “We expected export restrictions in two or three months, but inflation figures seem to have changed the government’s mind.”
Rising food and energy prices pushed India’s annual retail inflation to an eight-year high in April, boosting expectations that the central bank would raise interest rates more aggressively.

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

Rising costs for fuel, labor, transportation and packaging are also contributing to rising wheat flour prices in India.

It was not one wheat. Rising general prices have raised concerns about inflation, and the government has had to ban wheat exports, said another senior government official, who asked not to be named because the discussion of export restrictions was closed. For us, this is a great caution.

Smaller yields

This week, India set its record for exports for the fiscal year that began on April 1, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to increase supplies.

In February, the government projected production at 111.32 million tonnes, the sixth record harvest in a row, but in May cut the forecast to 105 million tonnes.

A jump in temperature in mid-March means the harvest could be around 100 million tonnes or even lower, said a dealer of a global trading firm from New Delhi.

“Government procurement has fallen by more than 50%. Deliveries to spot markets are much lower than last year. All this indicates a decline in yields, ”the dealer said.

Earning on the rally of world wheat prices after Russia invaded Ukraine, India exported a record 7 million tons of wheat in the fiscal year to March, which is more than 250% more than the previous year.

“Wheat prices have risen quite moderately, and Indian prices are still significantly lower than world prices,” said Rajesh Pahari Jain, a trader from New Delhi.

“Wheat prices in some parts of the country have jumped to current levels even last year, so the move to ban exports is nothing more than a reaction on your knees.”

Despite falling production and public procurement of the State Food Corporation of India (FCI), India could ship at least 10 million tonnes of wheat this fiscal year, Jane said.

To date, the FCI has bought from domestic farmers just over 19 million tons of wheat, compared to last year’s total purchases of a record 43.34 million tons. He buys grain from local farmers to implement a food welfare program for the poor.

Unlike previous years, farmers prefer to sell wheat to private traders who offered better prices than the fixed government.

In April, India exported a record 1.4 million tons of wheat, and in May already signed deals for the export of about 1.5 million tons.

“India’s ban to raise world wheat prices. There is no big supplier on the market now, ”another dealer said.

(1 dollar = 77.4700 Indian rupees)

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