Global wheat prices hit record high after India’s ban on export, G7 Condemns Move

Following India’s move to ban wheat exports, worldwide wheat prices jumped a record 6% on Monday, aggravating a global food crisis, according to trading statistics. The world was counting on India to help relieve the strain on wheat supplies caused by the Ukraine conflict.

On May 13, India, the world’s second-largest wheat producer, announced a ban on private exports to protect its “at-risk” food security, but left a window open for international shipments only if a foreign government specifically requested it to “meet their food-security needs.”

Analysts believe the country’s decision to prohibit exports will exacerbate a global food shortage and drive up prices even higher.

According to a Financial Times story, wheat futures sold on the Chicago Board of Trade, a global benchmark, climbed 5.9% to $12.47 a bushel (approximately 27 lb), a two-month high, while overall wheat prices have surged more than 60% this year due to disruptions caused by the Ukraine crisis.

Russia and Ukraine account for about a third of all wheat shipments worldwide.

Wheat prices in Europe hit a new high on Monday, rising to 435 euros ($453) a tonne (100 kg) at the benchmark Euronext market, up from 422 euros on Friday, according to an AFP report.

“India isn’t a big exporter of wheat in normal years. Yet, its ban on exports have set prices on fire precisely because global supplies are currently running very thin,” said Ashok Agrawal of Comtrade, a trading firm.

India hoped to export big volumes of wheat after the government predicted a record harvest of 111 million tonnes in February. The winter staple was shrunk by a heat wave that began in mid-March, causing the government to reduce production predictions by at least 5.7 percent to 105 million tonnes.

“…there is a sudden spike in the global prices of wheat arising out of many factors, as a result of which the food security of India, neighbouring and other vulnerable countries is at risk”, the Indian commerce ministry order banning exports said.

The G7 countries appeared to criticise India’s choice in a statement released on Saturday, raising eyebrows.

In the fiscal year that ended in March, India exported a record 7.85 million tonnes, up 275 percent from the previous year. The country had already negotiated to sell 4.5 million tonnes before the export embargo took effect, as the administration wanted to increase global sales.

According to the government’s export notification, these sales are expected to go through if formalities, such as letters of credit, have been provided. The country’s dealers sold 1.4 million tonnes offshore in April 2022, capitalising on high worldwide demand and prices.

“If this ban occurred in a normal year the impact would be minimal, but the loss of Ukraine volumes exacerbates the issues,” Andrew Whitelaw, a grains analyst at Melbourne-based Thomas Elder Markets, told Bloomberg.