Unloading of wheat on the outskirts of Amritsar, India, April 16, 2022 (AFP/Narinder NANU)
How far will he go? At the highest level since the war in Ukraine, wheat prices broke a record at the close on Monday in the European market after India announced a ban on its grain exports.
At the close of trading, the wheat price reached EUR 438.25 per ton, a new high for the grain, which is already being traded at gold prices on a tense world market. “This is an absolute record for all maturities on Euronext. The previous record is from March 7, 2022, when wheat closed at €422.50 per tonne,” Damien Vercambre, broker at Inter-Courtage, told AFP.
The prices on the European market had already risen to 435 euros per ton when it opened.
The world’s second-largest wheat producer, India, announced on Saturday that it would ban the export of this commodity, except with special government approval, in the face of a drop in its production, particularly due to extreme heat waves.
New Delhi, which previously pledged to supply wheat to fragile countries once dependent on exports from Ukraine, wants to ensure “food security” for India’s 1.4 billion people. A decision that will “exacerbate” the grain supply crisis on a global scale alarmed the G7 on Saturday.
Indian Prime Minister Narendra Modi with French President Emmanuel Macron at the Elysée Palace in Paris, May 4, 2022 ( AFP / STEPHANE DE SAKUTIN )
On a tour of Europe in early May, Indian Prime Minister Narendra Modi said he, along with French President Emmanuel Macron, was committed to “response in a coordinated and multilateral manner to the risk of a worsening of the food crisis stemming from the conflict in Ukraine”. .
– protect inventory –
The price increase also reflects the uncertainty about New Delhi’s intentions: “The contracts already signed should be respected, but we do not know what is going on with a shipment of 500,000 tons of wheat to Egypt,” said Damien Vercambre at the opening of the market on Euronext.
This ban decision is largely explained by worse-than-expected harvest estimates – a 5% drop from the 109 million tonnes of wheat harvested in 2021 – but not only.
“Unlike Russia, which has had a system of quotas and export taxes for years, India undoubtedly has greater difficulty controlling the volumes exported,” explains Damien Vercambre, as many growers abandon public operators in favor of private buyers who pay high prices for grain , who sees the decision as a way for India to protect its shares and curb runaway food price inflation.
On the world markets, the shock is all the more intense as India, the little thumb of wheat, is gaining momentum: it had exported 7 million tons in 2021 and is expecting 10 million tons this year, which now appears as one of the possible alternatives to Ukrainian wheat.
– Ukraine Crisis –
The subcontinent’s growth crisis comes at the worst possible time: According to forecasts by the US Department of Agriculture (USDA), Ukraine, which was on its way to becoming the world’s third-largest wheat exporter, is likely to cut its production by a good third this year, which will limit Kiev’s export capacity at just 10 million tons in 2022, compared to 19 million tons last year.
A wheat field in Ossas-Suhare, in the Pyrénées-Atlantiques, on May 27, 2021 (AFP / GAIZKA IROZ)
The price of wheat has already risen by an unprecedented 40% since the start of the war and has remained stable due to the current drought risks in the southern United States and western Europe.
As conflict in Ukraine stalled and new crops loomed in Australia and Canada, the promise of Indian wheat being harvested had brought some relief to tight markets, particularly in the Middle East and Asia, traditional Indian customers.
India’s ban on wheat, mirroring Indonesia’s ban on palm oil in the name of food sovereignty, promises to keep the pressure on in importing countries like Morocco, whose grain production will fall by more than 60%, or Iraq, where grain shortages of water have to led to a halving of the cultivated areas.
For market watchers, prices will remain high because “demand is still there.”