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Wheat soars more than 4% to two-month highs after world's second largest producer India bans exports

Hamza Fareed Malik   

Wheat soars more than 4% to two-month highs after world's second largest producer India bans exports
  • Wheat futures surged on Monday after second largest producer India banned exports following a heatwave.
  • The price jumped 4.36% to $12.28 a bushel, its highest in two months.

Wheat prices surged on Monday after India banned exports of the crop due to a heatwave and rising domestic prices.

India's Directorate General of Foreign Trade said in a notice on Friday that it would stop new shipments of wheat immediately but still allow exports to countries in need to help maintain their food security.

Wheat prices rose 4.36% to $12.28 a bushel on Monday, having risen to as much as $12.74, its highest since mid-March. The export ban from the world's second largest wheat producer is hitting an already tight market, given the supply disruptions from the Russia-Ukraine war.

Russia and Ukraine are both major wheat exporters, providing over 25% of global shipments. The war has created global shortages and sent grain prices surging. Ukraine's wheat production could decline by 35% compared with last year, according to analyst forecasts.

"The announcement comes as a major surprise to the market as the country previously indicated a push for higher exports after supply losses from Ukraine pushed up prices in the global market," strategists at ING said. "In fact, India was one of the few countries where the USDA was expecting wheat exports to increase and help fill the supply gap."

India is not a big exporter of wheat. Together with China and Russia, it account for over 40% of total global wheat production. Yet most of India's crop is consumed domestically. Analysts had expected it to partially offset shortfalls from Ukraine.

A scorching heat wave, with temperatures up to 45C, has drastically impacted domestic crop production and sent food prices jumping, adding to food security concerns, analysts said.

"India's export ban betrays the underlying stress that resides in the commodity space," Neil Wilson, chief markets analyst at, said.

Poor weather conditions and the fallout from Russia's invasion of Ukraine have roiled global commodity markets and hit countries around the world, with production of crops like wheat set to fall.

"Last week, the USDA lowered its forecast for US wheat production by more than expected, while war-hit Ukraine could see its production and exports slump to the lowest since 2012/13," Saxo Bank's strategy team said. "In addition, European growers have already been struggling with warm and dry weather this early in the season."

Indian officials said the ban is temporary and may be reversed. Some neighbouring countries would still get wheat exports.

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