The move comes just weeks after Delhi claimed it could increase supply to world markets

Food suppliers look set to face further sourcing challenges after India compounded already tight global wheat supplies with a ban on exports of the grain.

Global wheat prices by Monday had climbed by over 5% [Chicago Board of Trade] on year on year averages already up 60% [UN FAO], following the Indian government’s  move over the weekend.

Delhi’s intervention came just weeks after it said India could potentially supply more wheat for export due to huge domestic stocks and the prospect of a bumper harvest. A debilitating heatwave has since threatened expected output this year, as well as heightening concerns whether there will be sufficient supply of other domestically grown crops such as rice.

Warren Patterson, economist at Dutch bank ING, described the ban announcement as “a major surprise to the market” after India “previously indicated a push for higher exports after supply losses from Ukraine pushed up prices in the global market”.

Justifying the ban, which was quickly criticised by agriculture ministers in G7 countries, the Indian government said it had to intervene “to manage the overall food security of the country and support the needs of the neighbouring and other vulnerable countries”.

Food shortages have long been a politically sensitive issue in India, where an estimated 30 million people died during several famines during the 18th to 20th centuries.

While the Indian announcement was deemed a shock in some quarters as it reversed the government’s recent pledges to increase food exports, it arguably fitted with the government’s historic approach to food security.

UK Flour Millers director-general Alex Waugh said India in the past based food and farm policies around ensuring “domestic availability and pricing of critical foodstuffs such as wheat and rice”.

The announcement came with the caveat that India would allow some wheat exports to neighbouring countries if they reported shortages. Commerce minister Piyush Goyal said the curbs would “ensure food security for India, ensure sufficient supply to vulnerable countries, maintain India’s reliability as a supplier, and control inflation”.

India’s move followed warnings earlier this month that Australia and the US, also major wheat growers and exporters, would see smaller-than-expected crops this year due to weather and input cost concerns, and after the war between Russia and Ukraine – together sources of almost a third of the world’s traded wheat – pushed prices up and cut into supply.

The US Department of Agriculture said last week in its latest monthly crop output overview that global wheat production would likely be down this year, with the war in eastern Europe to cut Ukraine’s output by a third. The department’s report projected Russia would remain the world’s leading wheat exporter this year.

The AHDB in the UK said there had been “large gains” across the world’s grains markets in response to the US government’s projections, with UK feed wheat (Nov 22) futures contracts “following wheat and maize up” to trade at £339.50 by Friday afternoon.

By Monday morning, India’s announcement of export curbs pushed benchmark futures up again 5.9% to $12.47 1/2 a bushel in Chicago, the highest since shortly after the market was jolted by the Russian invasion of Ukraine in late February.

The global wheat market had “looked to India to fulfil some global demand for the season remainder”, the AHDB said on Monday, noting “a reaction to prices this morning” as the UK’s Nov-22 contract jumped again to £349.

The Food and Agriculture Organisation of the United Nations (FAO) earlier reported world cereal prices, which had been climbing since the imposition of economic and social restrictions in response to the coronavirus pandemic, had hit an all-time high in March, up more than 33% year on year and 12.6% month on month.

India’s ban followed the announcement two weeks ago of a palm oil export ban by Indonesia, the world’s biggest source of the oil. Jakarta’s measures also cited the need to ensure enough supply for domestic use, but came after edible oils markets were already in crisis over the near-elimination of sunflower oil from Ukraine, the world’s biggest supplier, and the ensuing across-the-board surge in prices of oils as worries about supply festered – prompting several British supermarkets to ration sales after suppliers announced cuts.

Carlos Mera, the head of Rabobank’s agri commodities markets team, said India’s ban was ”another example of food protectionism, where countries try to contain domestic food prices by restricting exports” and followed similar cases in “key agriculture producers” such as Russia, Indonesia and Argentina.