News that India will restrict wheat exports is fueling the wheat market fire. The US futures market CBoT reacted immediately with a price increase of 5,9%. The Matif in Paris also opened 0,0% higher on Monday morning. When the market has recovered from its initial shock, a correction is nevertheless expected.
The program news – which the Indian government released on Friday through their Official Gazette for Foreign Trade – mentions that the export of wheat is banned in the country. Wheat prices are also rising in India – about 40% since the beginning of this year. A series of heat waves is causing wheat production in the country to deteriorate. Reasons enough to curb exports.
Wheat prices on Chicago's CBoT rose 5,9% in overnight trading to $12,47 per bushel for the July contract. Monday morning Dutch time, the price is still significantly in the plus. The Matif closed Friday afternoon at €416,50 per tonne and opened Monday morning at the sharply higher level of €435 per tonne. That is an absolute price record.
Export Opportunities
India is the second largest wheat producer in the world after China. Most of it is used to feed the 1,38 billion inhabitants. When last season had a good harvest, part of it was exported. With the loss of Ukrainian wheat on the world market, India saw its chance. Egypt has so far bought 500.000 tons of Indian wheat, after an adjustment of the import requirements made this possible. Those deliveries will continue, despite the ban.
India planned to export 10 million tons of grains in the coming export season, mainly to Asian and African countries. This on a total production of 105 million tons. Indonesia, the Philippines and Thailand are especially big customers. Thanks to the high wheat prices, the country could theoretically cash out a lot. Drought and heat are now throwing a spanner in the works. The country's existing wheat stocks have been severely eroded over the past two years due to the effects of the corona pandemic. India has a subsidized food program for 80 million inhabitants. This requires about 25 million wheat.
Details unclear
Despite an explosive reaction in the US and European futures markets, analysts expect that reflection will follow. The details surrounding the export ban are unclear at best. Agreements that had already been made, such as those with Egypt, are being fulfilled, the news reports. It is certain that less Indian wheat will become available on the world market, but exactly how much remains to be seen.