“Unbelievable” India sparks chaos as government limits wheat exports

India’s government has amended its export policy on wheat to impose an immediate restriction on all activities in a move that has sparked chaos and been described as “unbelievable” by a trade source.

In a document from the country’s ministry of commerce, and seen by Fastmarkets Agricensus, the government declares the “sudden spike in the global prices of wheat arising out of many factors, as a result of which the food security of India, neighboring and other vulnerable countries is at risk.”

The document, dated May 13, announces then an amendment to the export policy and references HS codes for a variety of wheat grades confirming a switch from a free export policy to explicitly prohibiting exports with immediate effect.

The HS codes affected relate to durum wheat, high, low, and medium quality common wheat, spelt wheat, and meslin.

India has found itself caught in an unexpected position, with the country’s Prime Minister Narendra Modi encouraging the sector’s exporters to capitalize on expectations of a huge wheat harvest and seize market share from Russia and Ukraine amid heavy fighting in the Black Sea.

But searing hot weather has already forced revisions on Indian wheat production expectations, with some expecting output to fall as low as 95 million tonnes – versus expectations earlier in the year of 110 million tonnes.

That would severely crimp export surplus – while the ongoing Russian invasion of Ukraine shows no signs of coming to an imminent end, raising huge question marks over how reliable flows from the major exporting region will be through the balance of this year.

Speculation had mounted that India would apply the brakes, but the country had announced it was sending trade delegations to major wheat importers only on Thursday in a bid to drum up more trade and confirmed that the commerce ministry expects exports to hit 10 million tonnes in 2022/23.

Traders had met that expectation coolly, but this announcement has caused confusion.

“Limiting exports was expected,” one trader said, while a second described the development as “unbelievable.”

“India banned wheat exports with immediate effect, except for shipments where an irrevocable LC is already in place before the notification of this order. We might see a spike in global wheat prices on account of this,” a third trader told Agricensus.

Mixed reports surfaced in local media suggesting that operations at some key Indian ports or logistics connections had suspended work, while one of the main ports – Kandla – was said to have resumed work after a 20-minute stoppage.

Wheat prices have been gathering steam since 2021, as the loss of US and Canadian production in fiercely hot conditions tempered production outlooks – but growing tensions between Russia and most of the rest of the world over Ukraine stoked further upward momentum.

The two Black Sea countries were among the biggest wheat exporting nations in the world, with around a third of total world exports coming from the region.

All of that came to a halt when Russia brutally invaded Ukraine – and exports from Ukraine are likely to face severe disruption for the foreseeable future, while Russian entities are subject to deep international sanctions.

India stepped up to provide supply, signing deals to pave the way to export wheat to key importers like Egypt, while also dispatching bulk cargoes to countries like Vietnam.

Since then, the USDA’s update to its monthly Wasde report – released last week – slashing global wheat stocks by 13 million tonnes and reigniting upward momentum for all wheat prices.

To find out more about the evolving dynamics in the global wheat market, join our webinar on June 1 at 2pm and hear all the latest updates from Tim Worledge.