Wheat importers in Asia have been scrambling to search out new sources of provide on Monday after India banned exports of the grain on the weekend in a bid to maintain a lid on hovering home costs, commerce sources advised Reuters.
Importers, particularly these in Asia, have been banking on wheat from India, the world’s second-biggest producer, after exports from the Black Sea area plunged following Russia’s Feb. 24 invasion of Ukraine.
Russia and Ukraine collectively account for about 30% of worldwide wheat exports. Ukraine’s exports are severely hampered as a result of the battle has compelled it to shut its ports, whereas Russia’s exports have been hit by Western sanctions.
“Asian importers are more likely to be in serious trouble. India was the Ukraine/Russia various particularly for feed wheat. (They’re) already at the moment casting round for alternate options,” mentioned a Europe-based wheat dealer at a worldwide commerce home.
He mentioned importers in Asia have been even seeking to purchase extra Russian wheat regardless of cost issues linked to sanctions on Russian banks and elevated delivery insurance coverage premiums.
Benchmark wheat futures in Chicago jumped by their 6% restrict on Monday as markets reacted to the shock ban, which got here simply days after New Delhi mentioned it was concentrating on report wheat shipments of 10 million tonnes this 12 months.
Its coverage reversal now means solely exports backed by letters of credit score (LCs), or cost ensures, issued earlier than Could 13 can proceed.
That equates to solely about 400,000 tonnes, trade sources advised Reuters, including that 1.8 million tonnes is now trapped on the nation’s ports.
Merchants holding that wheat face heavy losses as a result of they should cancel their export offers and resell onto a weakening home market.
“It began already this morning. Merchants (who don’t have LCs) needed to announce cancellation of contracts. I’d assume from mid-June there will probably be no extra (India) shipments,” mentioned a second Europe-based wheat dealer.
India’s export ban, prompted by a heatwave that has reduce harvest prospects and pushed home costs to a report excessive, additionally comes amid output points in conventional export powerhouses Canada, Europe and Australia.
Merchants say the ban may drive world costs to new report peaks, hitting poor customers in Asia and Africa notably arduous.
Prime locations for Indian exports embrace Bangladesh, Indonesia, Nepal and Turkey, and prime world wheat purchaser Egypt just lately agreed to make a primary ever buy of Indian wheat.
That deal is formally nonetheless on the playing cards as India has mentioned it should nonetheless enable exports to nations that request provides “to satisfy their meals safety wants”, however market consultants are sceptical.
“There’s uncertainty over how a lot will probably be exported to nations India considers having meals safety wants. They may simply export to pleasant neighbouring nations,” mentioned Carlos Mera, agri commodities analyst at Rabobank.