How far will he go? At its highest since the war in Ukraine, wheat prices broke a new record on Monday in the European market, following India’s announcement of an embargo on its cereal exports.
A tonne of soft wheat traded at 435 euros at the opening on Euronext, a new record for cereal already trading at gold prices in a tight world market. On the Chicago Stock Exchange, shortly before the opening, the price of SRW variety wheat reached $ 12.3525, up 4.90%.
The world’s second largest wheat producer, India, announced on Saturday that it would ban the export of this commodity, except with special government authorization, in the face of a decline in its production due to particularly severe heat.
broken promise
New Delhi, which had previously promised to supply wheat to fragile countries once it relied on exports from Ukraine, said it wanted to ensure Food Safety of India’s 1.4 billion people. A decision that goes the crisis worsened supply of world -level cereals, the G7 was alarmed on Saturday.
During a tour of Europe in early May, Indian Prime Minister Narendra Modi said he, along with French President Emmanuel Macron, was determined to respond in a coordinated and multilateral manner to the risk of aggravation of the food crisis due to the conflict in Ukraine.
Markets are more responsive as the embargo announcement seems to contradict global supply promises previously made by India, says Gautier Le Molgat, an analyst at Agritel.
The rise in prices also reflects uncertainty about New Delhi’s intentions.
” The contracts already signed should be respected, but it is not clear what will happen to the delivery of 500,000 tonnes of wheat to Egypt under negotiation. “
This ban decision was specifically explained by worse than expected yield estimates – down 5% compared to 109 million tonnes of wheat harvested in 2021 – but not only that.
Unlike Russia, which for many years had a system of export quotas and taxes in place, India is likely to have difficulty controlling export volumes.many producers are abandoning public operators in favor of private buyers paying high prices for cereals, explains Damien Vercambre, who sees this decision as a way for India to protect its stocks and limit rapidly rising food prices.
In world markets, the shock is more intense as India, the little thumb of wheat, is gaining momentum: it exported 7 million tonnes in 2021 and expects 10 million this year, which is now appears as one of the possible alternatives. in Ukrainian wheat.
War and drought
The sub-continent’s growth crisis is coming at a very bad time: Ukraine, which is on its way to becoming the world’s third largest wheat exporter, should see its production cut by a good third this year, according to forecast by the US Department of Agriculture (USDA), which estimates kyiv’s export capacity at only 10 million tons in 2022, compared to 19 million tons last year.
At an unprecedented level, wheat prices have risen 40% since the start of the war and have remained flat due to current drought risks in the southern United States and Western Europe.
As the fighting in Ukraine erupted and new harvests of Australia and Canada were pending, the promise of Indian wheat, being harvested, provided little relief to markets under tension, particularly in the Middle East and Asia, the traditional customers from India.
India’s ban on wheat, echoing Indonesia’s ban on palm oil in the name of food sovereignty, promises to keep pressure on importing countries, such as Morocco, whose grain production will drop by more than 60%, or Iraq, where water shortages have led to the reduction of cultivated areas by half.
For market observers, prices will remain supportive, since the demand is still there.
Source: Radio-Canada
