India has recently given the wheat market an unexpected shake up. On Monday May 16, India imposed an unforeseen ban on wheat exports. This sudden measure has resulted in a rise on wheat prices.
Recently India had raised its export expectations by 10 million tonnes as the country projected upon new opportunities due to the fact that exports from Ukraine have become almost impossible due to Russian invasión. Grains which were normally shipped through the Black Sea cannot leave Ukraine due to Russian blocks on this waterway. Therefore, Ukraine is looking at alternatives to export grains to the west by railway, but this brings greater complications, and has limited grain exports as a result.
Heat wave takes its toll on current production
The onset of a current heat wave has impacted the existing wheat crop and has taken its toll on previous high expectations for the coming harvest. Previously established agreements on wheat exports are are being complied with. Such is the case with Egypt which has secured 500,000 tonnes of wheat from India just in time. In order to fulfill its wheat requirements, Egypt has set its sight on other sources like Australia, France and Kazakhstan.
The USDA Department of Agriculture issued an initial forecast for the wheat harvest in the 2022-2023 season, reporting stock reductions. According to USDA wheat stocks will decline for this season, and this is especially true for India. Part of this information may be based on India’s claims of wanting to become more active in the export market.
India a small player at a global scale
India is expected to export 8.5 million tonnes of wheat for the 2022-2023 season which is slightly larger than the current season’s exports. These are large quantities by India’s standards considering that in recent years almost no wheat was exported, with approximately 2.5 million exported in the 2020-2021 season, This places India as small player within the world market. Moreso if the estimates for the new season are compared to what USDA has forecasted for the world largest exporter whic is Russia. In such forecast Russia has been projected to produce 80 million tonnes and is expected to export 39 million tonnes. American estimates suggest that the European Union will harvest 136.5 million tonnes of wheat in 2022 and will be able to export about 36 million tonnes. Time will tell how this scenario will pan out, and what kind of effect will the measures taken have on India’s wheat futures.