Absolute Record. Wheat closes at an unprecedented level after India’s decision

The Wheat prices reached 438.25 euros per ton at the close of the session, a new record for this grain that was already trading at high levels following the Russian invasion of Ukraine.

“It is an absolute record in Euronext. The previous record on March 7 at closing was $422.50 per ton.”mediator Damien Verkamper told AFP.

India, the second wheat-producing country in the world, announced on Saturday that it would ban its exports of these grains, in light of the decline in its production due to severe heat waves in particular.

New Delhi, which has pledged wheat to fragile states that depend on imports from Ukraine, wants to ensure “food security” for its 1.4 billion people.

A decision that would “exacerbate the crisis” of grain supplies worldwide, upset the Group of Seven on Saturday.

However, during a trip to Europe in early May, Indian Prime Minister Narendra Modi, along with French President Emmanuel Macron, announced that he was determined to “respond in a coordinated and multilateral manner to the risk of the food crisis being exacerbated by the conflict in Ukraine”.

The price hike also reflects uncertainty about New Delhi’s intentions: “The contracts already signed must be respected, but it is not known what will happen to the delivery of 500,000 tons of wheat to Egypt, which is being negotiated,” according to Damien Verkamper, during the opening session on Euronext.

This ban decision is attributable to the crop estimates below, about five percent, 109 million tons harvested in 2021, but not only.

“Unlike the Russian Federation, which has had a system of quotas and export taxes for years, India has more problems in controlling the volume of exports,” as many producers have shifted public operators in favor of private buyers, who pay more for the grain, he explained Damien Verkamper.

In global markets, the shock was even greater as India was increasing its importance in this market: after exporting seven million tons in 2021, it was now targeting 10 million tons, which appears to mitigate the decline in Ukrainian exports.

Indeed, the crisis in the Indian subcontinent comes at a very bad time, as production of Ukraine, which was on its way to becoming the world’s third largest wheat exporter, is expected to be reduced by a third, according to forecasts by the US State Department. Agriculture: The United States, which estimates Ukraine’s export capacity in 2022 is limited to 10 million tons, compared to 19 million last year.

The price of wheat has risen by 40% since the beginning of the Russian invasion of Ukraine, also including the current risks of drought in the southern and western United States.

While the conflict caused by the Russian Federation in Ukraine continues and the Australian and Canadian crops await, the promise of Indian wheat, at harvest stage, has somewhat softened markets, particularly in the Middle East and Asia, traditional customers of India.

This Indian ban on wheat, as well as Indonesia’s palm oil in the name of food sovereignty, promises more pressure on importing countries such as Morocco whose grain production will fall by more than 60%, or Iraq where lack of water has caused a decrease in planted areas by more than half.

For market watchers, prices will continue to hold, because “demand is still there.”

Read also: India bans wheat exports due to high global prices

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