The second-largest wheat producer has halted wheat exports in a ban that will further strain the global wheat supply. This represents an unexpected u-turn from just one month ago when Indian Prime Minister, Narendra Modi, said that the nation would step in to plug the gaps in the market.

India, a powerhouse wheat producer that already exports wheat to 68 countries, is also one of the cheapest global suppliers.

The Asian giant will still allow exports backed by already issued letters of credit and to countries that request wheat to meet food security needs – a silver-lining as food prices have skyrocketed in the previous months, only showing some slow down this April.

The export ban is implemented to avoid rising domestic prices. However, it is not clear why India has opted to perform a 180 turn, given its vast wheat supplies.

India has been suffering from a set of heat waves since March with temperatures rising to over 40 degrees Celsius.WTO trouble
Modi announced last week that India would “supply food stocks to the world from tomorrow” if the World Trade Organization would allow it.

India has clashed with the WTO in recent months in an effort to boost exports while skipping some WTO domestic reserves regulations. India’s Ambassador to the US, Taranjit Singh Sandhu, said in April:

“I had voiced that countries like India, which have the potential for exporting agricultural produce, particularly cereals, have faced difficulties with the WTO. [Even when] the entire plenary was recognizing that theres hunger and shortage of food grains all over the world, countries like India, which can probably supply, are facing difficulties with WTO.”

“India is trying to find markets for its products first and secondly trying to be of meaningful assistance wher there is hunger, there are grains to go and nothing should stop them from going there.”

Expecting to arrive at a solution with the WTO, which is proving to be impossible, an ultimately leading to the export ban. Indian officials stated that the ban was not meant in perpetuity. They are previewing future reviews on the ban if there are changes in global prices. 

Scorched earth
India has been suffering from a plague of heat waves since March, one after another, with temperatures rising to 40 degrees Celsius and nearing 50 in some locations. Recording the hottest March and April months ever.

On May 4, the Indian government had to slash its wheat production estimates by 5.7% to 105 million tons from the initially projected 111.32 million metric tons. 

Last week, UN economist for the Food and Agriculture Organization, Monika Tothova told FoodIngredientsFirst, that there was no cause yet to panic as India’s production was still sufficient to achieve substantial exports. 

“In India, heat waves have not affected the wheat crop across the entire country equally. In the southern and central part of the country, when the heat wave started, wheat had already gone through the grain filling stage and as such did not endure damages.” 

“In the more northern areas, grain was not yet fully formed, and losses were likely. Still, although revised downwards, India will still gather a significant wheat crop.” 

The race to the bottom continuesIndia, the largest wheat producer, exported cheap wheat to 68 countries before the ban.
Open markets have lost some of their biggest wheat and palm oil suppliers in less than a month, as Indonesia introduced a palm oil export ban this April to ease prices and preserve national reserves of cooking oil. Limiting cooking oil prices to just under US1$. 

“As the world’s biggest producer of palm oil, it is ironic that we are experiencing a shortage of cooking oil. As president, I cannot allow that to happen,” says Indonesian President Joko Widodo.

The Global Alliance for Improved Nutrition (GAIN) warned that devastated supply chains in Ukraine and Russia, which are cutting off wheat, corn, sunflower oil and barley exports, will cause scarcity and unaffordability of nutrient-rich foods. It also raised the alarm of the necessity to keep food trade flowing, calling on countries to continue exporting and to resist the temptation to hoard exports.

“That simply leads to a race to the bottom for all,” says Dr. Lawrence Haddad, executive director, GAIN.