On Monday, wheat prices significantly soared after India, one of the top producers, banned exports amid the scorching heatwave in the country.
The most active futures tied to the grain jumped 5.22% or 61.60 points to $1,242.10 per metric ton. It extended its previous upsurge of 6.35% to 1,241.38 per metric ton.
New Delhi announced the sudden embargo on Saturday, aiming to manage the overall food security of the county. The government also seeks to curb the multi-year high inflation.
The local government said it would still allow exports backed by already issued letters of credit. It will also serve countries that request supplies to meet their food security needs.
Previously, global buyers piled up supplies from the world’s second-leading wheat producer after output from the Black Sea region plunged. Prior to the ban, India had aimed to ship a record 10.00 million tons this year.
Nevertheless, officials cited no dramatic fall in the grain output this year. However, the unregulated exports had triggered a rise in local prices.
Correspondingly, analysts anticipated that the wheat embargo could drive global prices to new peaks, given the tight market supply. This projected upswing will hardly hit poor consumers in Asia and Africa.
India’s ban triggers upside for Wheat prices
Accordingly, wheat traders did not expect the newly imposed ban from the Indian government. The red-hot domestic costs pushed the country’s annual retail inflation near an eight-year high in April.
Eventually, wheat prices in India have soared to record highs, hitting up to $320.00 per ton. The level is well above the government’s minimum support mark of $259.06 per ton.
In February, the government estimated production of 111.32 million tons, representing the sixth straight record crop. However, it slashed the outlook to 105.00 million tons this month.
Meanwhile, dealers anticipated 100.00 million tons or even lower due to the spike in temperatures in mid-March.
Moreover, the state noted that the mounting fuel, labor, transportation and packaging could further boost the price of wheat.