Wheat price soars after India’s decision to suspend exports

The price of wheat, which had already been on the rise since the beginning of the war in Ukraine, hit a record again this Monday (16) in the European market, after India’s announcement to suspend its grain exports.

A ton of wheat for baking closed today at 438.25 euros (about R$ 2,315) on Euronext, an absolute record for the grain, which was already being traded at gold price on the world market.

“This is an all-time record for all Euronext maturities. The previous record dates back to March 7, 2022, when wheat closed at €422.50 per tonne,” said Damien Vercambre, a broker at Inter-Courtage.

India, the world’s second-largest wheat producer, on Saturday banned the export of the grain unless there is special government authorization. The decision was adopted at a time when the country is experiencing a drop in production due to extreme heat waves.

New Delhi, which had previously pledged to supply wheat to fragile countries dependent on Ukraine’s exports, claimed the decision was aimed at ensuring “food security” for its 1.4 billion people.

Also on Saturday, G7 agriculture ministers said the suspension of Indian wheat exports would “aggravate the crisis” in world grain supplies caused by the Ukraine war.

Now, “markets are reacting more strongly as India’s embargo on its wheat exports contradicts its earlier promises about world supply,” said Gautier Le Molgat, an analyst at agricultural consultancy Agritel.

Alternatives to wheat from Ukraine

In world markets, the commotion is even greater, as India, initially an average wheat exporter, was on its way to becoming a major player in the sector: it exported 7 million tons in 2021 and was betting on reaching 10 million this year. , becoming one of the possible alternatives to Ukrainian wheat.

Before the conflict, which began with the Russian invasion on February 24, Ukraine was the world’s fourth largest exporter of corn and was becoming the third largest global supplier of wheat.

Its wheat production could be severely reduced this year, according to forecasts from the US Department of Agriculture, which considers that Kiev will only have the capacity to export 10 million tons in 2022, against 19 million tons a year earlier.

The price of wheat has increased by 40% since the beginning of the war and remains high due to drought risks in the United States and Western Europe.

In this context, and with the war in Ukraine extending over time, the promise of Indian wheat had somewhat relieved markets, especially in the Middle East and Asia, India’s traditional customers.

For observers, prices will remain high, as “demand will always exist”.