Global Markets: Wheat – India Bans Exports to Ensure Sufficient Domestic Food Grain Supply

    The trade year (TY) 2022/23 (July-June) export forecast for India is revised down 2.0 million tons to 6.0 million after the Indian government implemented restrictions on wheat exports effective May 13, 2022. The export ban comes after a heatwave scorched India’s wheat belt this spring, leading to a smaller-than-expected 2022 crop.

    India is also grappling with rising food prices and low procurement under its minimum support price (MSP) program, further influencing the decision to curb exports to ensure a sufficient supply of wheat for domestic use.

    India’s export ban removes another source of affordable wheat for many low-income importing countries, adding stress to an already tight global market. Strong global demand has outpaced production, driving world wheat prices to their highest levels in a decade. In 2020/21, India emerged as an important wheat exporter to the Middle East and South Asia.

    Wheat exports in 2021/22 had been growing significantly, with exports reaching a record 6.8 million tons in the first 9 months of the trade year. Additionally, India’s exports have extended to markets traditionally supplied by Ukraine.

    India has suggested it may allow some exemptions to the ban on a case-by-case basis for government-to-government sales for food security reasons. It has received requests for more than 1.5 million tons from several countries under the exemption.

    In addition to the export ban, the government of India is adjusting its domestic food security policies. Due to the tight wheat supply situation, the government has shifted to procuring and distributing more rice and less wheat in its food security programs. As a result, overall wheat consumption in India is forecast to decline, while rice consumption is forecast to rise.

    Unlike wheat, India rice supplies are plentiful in 2022/23. Rice exports are forecast to remain robust as India remains the dominant global rice exporter. Following multiple seasons of record crops, rice stocks have more than doubled in recent years, leaving ample room for both exports and higher domestic use.

    Despite increased exports and more distribution for the government’s food security programs, India’s rice stocks are still expected to rise. The ample supply situation suggests that export restrictions on rice are less likely.

    Russian Exports Set to Hit Record on Larger Crop and Reduced Competition

    This month, 2022/23 Russia exports are up 1.0 million tons to a near-record 40.0 million tons (up 7.0 million tons from the prior year) on a more abundant harvest and dominance over other Black Sea suppliers. Russia’s winter wheat crop was decimated last year by an unusual ice-crusting event, but growing conditions this year have remained favorable with limited winterkill and yields are expected to be higher.

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    In the latter part of 2021/22, Russia wheat exports have had two key limiting factors: an export tax and export quota. The export tax has risen significantly over the past year and now is at $129/ton with no indication that the Russian government plans to remove this tax.

    The export quota limited Russia exports between February 15 and June 30 to 8.0 million tons. With the new crop harvest anticipated to be favorable, Russia is expected to resume exports in July without the quantitative restrictions of a quota.

    Russia exports are also expected to expand given the challenges for Ukraine exports. Since the Russian invasion, Ukraine has been extremely limited in its shipments by sea, which traditionally accounted for the bulk of its exports. Ukraine has shifted to shipping by land including by rail, but volumes remain low.

    Discussions are ongoing about potentially opening a corridor for Ukrainian exports. However, there has been little progress thus far as Russia has called for lifting sanctions as a prerequisite to ensuring an open flow of Ukrainian exports.

    Based on a smaller-than-expected crop and concerns about domestic supplies, India announced an export ban in May. This ban further exacerbates the situation for price-sensitive markets that had started to turn to it for supplies, but creates further opportunities for Russia to ship to India’s markets.

    In addition to new crop availability in the coming month and relatively competitive prices, Russia exports are also expected to benefit from strong demand from key importers in the Middle East and North Africa. In many of these countries, the government procures wheat to ensure affordable supplies to the population, resulting in relatively inelastic demand.

    Despite economic sanctions and a hefty export tax, Russia is still poised to be the top wheat exporter in 2022/23 as importing countries seek affordable supplies.

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