India has banned the export of wheat, a move likely to push up food prices and fuel hunger in poor countries dependent on imports of the commodity.
The Indian government said it was introducing a ban on overseas sales “to ensure the country’s overall food security and to support the needs of neighboring countries and other vulnerable countries”.
However, she said she would continue to allow exports for which letters of credit had already been issued and would consider sales to countries looking to meet their food security needs.
The announcement, one of the latest protectionist measures taken by food-exporting countries following this year’s price spike, follows denials by Indian government officials that they would halt wheat exports.
India had closed the export supply gap in international wheat markets left by Ukraine after Russia invaded, but concerns had increased over export restrictions amid a heatwave that has ravaged the country since March.
The reversal came after Indian government data this week showed that domestic inflation rose to its highest level in eight years, with rising food prices alarming policymakers.
Traders were predicting chaotic trading in international wheat markets when they open early next week as the ban would come as a blow to buyers looking for wheat supplies. “This is an absolute bomb,” said Swithun Still, a Swiss-based grain trader. “There will be panic in the wheat futures markets when they open,” he added.
India, one of the world’s largest wheat producers, had a bumper harvest last year while some other key exporters, including Canada and Argentina, suffered from poor weather.
India’s wheat exports soared to a record high of more than 7 million tons a year, which ended in March when the war all but halted exports from Ukraine.
But the scorching heat of March and April, where temperatures soared to 45C hit large parts of India’s wheat belt, has heightened concerns about the country’s domestic supply. With several weeks of heat expected before the annual monsoon kicks in next month, the government recently cut its forecast for the current crop by 5 percent to 105 million tonnes for the year to June.
Wheat prices are at staggering levels due to supply problems caused by the Ukraine war and droughts around the world. The US Department of Agriculture forecast that global inventories for the upcoming crop year would fall for the first time in four years. “The USDA has made it clear that we are headed for a global food crisis,” said Carlos Mera, an analyst at Rabobank. “The next 12 months will be very challenging.”
Chicago wheat futures, the international benchmark, closed at $11.6725 a bushel, up 50 percent from the start of the year, while the European wheat futures market was trading at €410.75 a ton, just below its record high in March.
India’s April CPI rose 7.8 percent from a year earlier, the highest reading since 2014, according to data released on Thursday.
Concerns about the rapid rise in prices prompted the Reserve Bank of India to hike interest rates unexpectedly for the first time in four years this month.
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