How far will he go? At its highest since the war in Ukraine, the price of wheat broke a new record Monday on the European market, after the announcement of India of an embargo on its exports of the cereal.
• Read also: When agricultural fields become battlefields
• Read also: The theft of Ukrainian grain by the Russians is “disgusting”, accuses Germany
A ton of soft wheat traded at 435 euros at the opening on Euronext, a new record for the cereal which is already trading at gold prices on 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 exports of this commodity, except with special government authorization, in the face of a drop in its production due in particular to extreme heat waves.
New Delhi, which had previously pledged to supply wheat to fragile countries once dependent on exports from Ukraine, said it wanted to ensure “food security” for India’s 1.4 billion people. A decision that will “aggravate the crisis” of cereal supply at the world level, the G7 was alarmed on Saturday.
On tour in Europe in early May, Indian Prime Minister Narendra Modi said he was, alongside French President Emmanuel Macron, determined “to respond in a coordinated and multilateral manner to the risk of aggravation of the food crisis due to the conflict in Ukraine. “.
“The markets are reacting all the more so as the announcement of the embargo seems to contradict the promises on global supply” previously made by India, noted Gautier Le Molgat, an analyst at Agritel.
Uncertainty
The surge in prices also reflects uncertainty about New Delhi’s intentions: “The contracts already signed should be respected, but we do not know what will happen to a delivery of 500,000 tonnes of wheat to Egypt under negotiation,” said Damien Vercambre, broker for Inter-Courtage.
This ban decision is explained in particular by worse than expected harvest estimates – down 5% compared to the 109 million tonnes of wheat harvested in 2021 -, but not only.
“Unlike Russia, which for years has implemented a system of quotas and export taxes, India is undoubtedly having more difficulty controlling the volumes exported”, with many producers abandoning public operators in favor of 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 galloping food price inflation.
On the world markets, the shock is all the more severe as India, the little thumb of wheat, is gaining momentum: it had exported 7 million tonnes in 2021 and was counting on 10 million this year, now appearing as one of the alternatives possible to Ukrainian wheat.
Growth crisis
The subcontinent’s growth crisis comes at a very bad time: Ukraine, which was on the way to becoming the world’s third largest wheat exporter, should see its production cut by a good third this year, according to forecasts from the American Department of Agriculture (USDA), which estimates kyiv’s export capacity at only 10 million tonnes in 2022, compared to 19 million tonnes a year earlier.
Already at an unprecedented level, the price of wheat has risen by 40% since the start of the war and remained sustained due to the current risks of drought in the southern United States and in Western Europe.
As the conflict bogged down in Ukraine and pending new Australian and Canadian harvests, the promise of Indian wheat, being harvested, had provided some relief to markets under tension, particularly in the Middle East and Asia, traditional customers from India.
India’s ban on wheat, which echoes Indonesia’s ban on palm oil in the name of food sovereignty, promises to keep up the pressure in importing countries, such as Morocco, whose grain production will fall by more than 60%, or Iraq, where the lack of water has led to the reduction of cultivated areas by half.
For market observers, prices will remain strong, because “the demand is still there”.
1
