International wheat prices rose on Monday as a result of an export embargo threatening to further cut global wheat supplies due to the war in India, the latest country to use trade sanctions to combat food inflation.
US and European wheat futures rose nearly 6%, with the Chicago market – the global benchmark – reaching its daily trading limits earlier and Paris prices reaching all-time highs.
At 1135 GMT, the Chicago Futures Wv1 rose 4.3%, the highest in the previous two months, while the Paris BL2U2 rose 4.1%.
Wheat has contributed to record highs this year for global food prices, as measured by the UN Food and Agriculture Organization.
India’s sanctions, triggered by a heatwave that reduced crop prospects and boosted domestic prices, marked a U-turn in a policy that the government maintained just a few days ago, still a record export target of 10 million tonnes, to help offset Ukraine’s supply shortfall.
Authorities said they would allow existing export sales under credit and government-to-government agreements to meet food security demand.
Although many traders and analysts had hoped to curb exports at some point due to the growing effects of the heatwave, the sudden announcement puts pressure on the market for the world’s most eaten cereals.
“This is a strong market and wheat stocks are declining, especially in exporting countries,” said Carlos Mera, head of agricultural product research at Rabobank.
“Wheat is a sensitive and political market, and many countries have food security concerns.”
Faced with rising food inflation, other countries have also tried to secure domestic supplies, with Indonesia banning palm oil exports in late April.
Extreme weather, including drought in parts of the United States and France, threatens production prospects in other major exporting countries, prompting Indian export bans.
Despite Ukraine’s long-term export disruptions and Russia’s own ability to export due to Western financial sanctions, despite the prospect of a favorable crop, there may be no short-term relief for wheat importers.
“We’re in an unexpected region, it’s a perfect storm,” said one European grain trader. “Fighting social unrest is on the agenda of every government.”
Traders were assessing how much wheat would be exported from India under the former private-sector agreement and through the government-to-government system.
Egypt said on Sunday it had agreed to buy half a million tonnes of wheat from India and that the purchase would be exempted from export bans.
Traders will closely monitor the weather in North America and Europe to see if there is an improvement in crop prospects.
In France, overnight storms brought some rain to the dry crop belt, but the country’s main farm union said more regular rainfall was needed as the cereal crop matured.
In the United States, winter wheat ratings have been at their worst since 1996, when spring wheat planting was hampered by humid weather.
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