July 2, 2022

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Wheat prices have risen following the ban on Indian exports

How far will he go? After the war in Ukraine, wheat prices broke a new record in European markets on Monday, following India’s ban on grain exports.

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At the start of Euronext a tonne of soft wheat traded at 435 euros, a new record for grain already trading at a tight global gold price. At the Chicago Stock Exchange, SRW wheat rose 4.90% to $ 12.3525, just before the start.

India, the world’s second-largest wheat producer, on Saturday announced a ban on exports of these products without special government approval, especially in the face of a sharp drop in production.

New Delhi, which had earlier promised to supply wheat to vulnerable countries dependent on exports from Ukraine, has said it wants to ensure “food security” for India’s 1.4 billion people. The G7 warned on Saturday that a decision would “exacerbate” the global grain supply crisis.

Indian Prime Minister Narendra Modi, who is touring Europe in early May, along with French President Emmanuel Macron, said it was a “concerted and multidisciplinary response to the risk of worsening food crisis in Ukraine.” .

Gautit Le Molgat, analyst at Agritel, noted: “Markets are still reacting to the ban, which appears to be in defiance of global distribution promises.”

The price hike also reflects uncertainty about New Delhi’s intentions: “The agreements already signed should be respected, but we do not know what will happen if 500,000 tonnes of wheat is delivered to Egypt under negotiation,” said Inter’s broker Damien Verkampre. – Respect.

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Compared to the 109 million tonnes of wheat harvested in 2021 – 5% less – this ban result has been particularly poorly explained than expected harvest estimates.

“Unlike Russia, which has implemented quotas and export taxes for years, India is undoubtedly having difficulty controlling the volume of exports,” explains Damien Verkamprey, who has dropped public operators in favor of private buyers who overstate the high prices of many cereals, to protect India’s stake in rising food prices. He also sees it as a way to control inflation.

In global markets, India, the tiny thumb of wheat, is in for a shock as it accelerates: it exports 7 million tonnes in 2021, counting 10 million this year, and now appears to be one of the viable alternatives. For Ukrainian wheat.

The subcontinent’s growth crisis is coming at its worst: Ukraine, which is on track to become the world’s third-largest wheat exporter, is expected to cut its production by a third this year, according to the US Department of Agriculture (USDA). The export capacity of kyiv in 2022 is estimated at only 10 million tonnes, up from 19 million tonnes a year ago.

Already at an unprecedented rate, wheat prices have risen by 40% since the beginning of the war and have persisted due to the current risks of drought in South America and Western Europe.

With the conflict in Ukraine looming and new Australian and Canadian harvests pending, the promise of an Indian wheat harvest has provided some relief to tense markets, especially India’s traditional customers in the Middle East and Asia.

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India’s ban on wheat, which echoes Indonesia’s ban on palm oil in the name of food sovereignty, promises to keep up pressure on importing countries such as Morocco, where grain production is falling by more than 60%, or Iraq, which is in short supply. Cultivation area has been halved due to water.

For market audiences, prices are strong because “demand is still there”.