The abrupt ban will also make it harder for exporters to profitably sell port-bound stocks
The abrupt ban will also make it harder for exporters to profitably sell port-bound stocks
India’s wheat export ban has locked about 1.8 million tonnes (MT) of grain in ports, leaving traders with heavy losses at the prospect of selling in a weaker domestic market, four traders told Reuters.
New Delhi banned wheat exports on Saturday, just days after it said it was targeting record shipments of 10 MT this year as a searing heatwave curbed production and domestic prices hit a record high.
Only exports backed by letters of credit (LCs) or payment guarantees issued before May 13 can proceed before the ban takes effect, India said.
But of the roughly 2.2 million tons of wheat currently in ports or underway, traders only have LCs for 4,00,000 tons, a Mumbai-based trader for a global trading firm said.
“Exporters don’t know what to do with the remaining 1.8 million tons. No one thought the government would ban exports entirely,” said one trader, who declined to be named due to company policy.
A Mumbai-based trader said the ban could force it to declare force majeure for deliveries to overseas customers.
“We bought wheat from traders and shipped it to ports,” the trader said. “Our intention is to meet export commitments, but we cannot override government policy. Therefore, we have no choice but to declare force majeure.”
Global buyers bet on supplies from the world’s second-largest wheat producer after exports from the Black Sea region collapsed after Russia’s largest exporter invaded Ukraine on February 24.
Importers such as Bangladesh, Indonesia and the United Arab Emirates may struggle to find alternative suppliers as global prices soar.
The abrupt ban will also make it harder for exporters to profitably sell port-bound stocks.
They may have to resell those cargoes to the weaker domestic market, which has come under fresh price pressure since the export ban was announced, a New Delhi-based trader told a global trading firm, and they’ll also have to pay for transshipment and transport costs.
About 1.4 million tons of wheat are currently stuck or in transit at west coast ports like Mundra and Kandla, while about another 8,00,000 tons are at east coast ports of Kakinada, Tuticorin and Visakhapatnam, traders said.
“Ship loading has been stopped in some ports. Thousands of trucks are waiting to be unloaded at the ports without any clarity,” the trader said.
Global trading houses are affected by the ban because in some transactions their Indian subsidiaries had sold the wheat to their regional headquarters in Singapore before securing the necessary LCs, an exporter said.
Strong export demand and expectations that the government would support shipments of at least 8 to 10 million tons encouraged exporters to shift freight to ports after buying from farmers, said a New Delhi-based trader at a global trading house.
Each trading house wanted to ship as much as possible before the end of June as harvest movements become difficult once the monsoon rains increase, the trader said.
“The Commerce Department and even the state governments have been helping exporters. The exports were profitable, so we never thought the government would do something like that,” he said.
