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Importers, particularly these in Asia, had been banking on wheat from India, the world’s second-biggest producer, after exports from the Black Sea area plunged following Russia’s Feb. 24 invasion of Ukraine.
Russia and Ukraine collectively account for about 30% of world wheat exports. Ukraine’s exports are severely hampered as a result of the warfare has pressured it to shut its ports, whereas Russia’s exports have been hit by Western sanctions.
“Asian importers are prone to be in serious trouble. India was the Ukraine/Russia different particularly for feed wheat. (They’re) already right now casting round for options,” mentioned a Europe-based wheat dealer at a world commerce home.
He mentioned importers in Asia had been even seeking to purchase extra Russian wheat regardless of cost issues linked to sanctions on Russian banks and elevated delivery insurance coverage premiums.
Benchmark wheat futures in Chicago jumped by their 6% restrict on Monday as markets reacted to the shock ban, which got here simply days after New Delhi mentioned it was focusing on report wheat shipments of 10 million tonnes this 12 months.
Its coverage reversal now means solely exports backed by letters of credit score (LCs), or cost ensures, issued earlier than Could 13 can proceed.
That equates to solely about 400,000 tonnes, trade sources instructed Reuters, including that 1.8 million tonnes is now trapped on the nation’s ports.
Merchants holding that wheat face heavy losses as a result of they should cancel their export offers and resell onto a weakening home market.
“It began already this morning. Merchants (who do not have LCs) needed to announce cancellation of contracts. I might assume from mid-June there might be no extra (India) shipments,” mentioned a second Europe-based wheat dealer.
India’s export ban, prompted by a heatwave that has reduce harvest prospects and pushed home costs to a report excessive, additionally comes amid output points in conventional export powerhouses Canada, Europe and Australia.
Merchants say the ban may drive international costs to new report peaks, hitting poor customers in Asia and Africa significantly exhausting.
High locations for Indian exports embody Bangladesh, Indonesia, Nepal and Turkey, and prime international wheat purchaser Egypt not too long ago agreed to make a primary ever buy of Indian wheat.
That deal is formally nonetheless on the playing cards as India has mentioned it’s going to nonetheless enable exports to international locations that request provides “to satisfy their meals safety wants”, however market specialists are sceptical.
“There’s uncertainty over how a lot might be exported to international locations India considers having meals safety wants. They may simply export to pleasant neighbouring international locations,” mentioned Carlos Mera, agri commodities analyst at Rabobank.
