India’s surprise wheat export ban traps 1.8 MT in ports: trade

The blunt ban will also make it more difficult for exporters to profitably sell inventory at ports.

The blunt ban will also make it more difficult for exporters to profitably sell inventory at ports.

India’s wheat export ban has trapped some 1.8 million tonnes (MT) of grain in ports, leaving traders facing heavy losses from the prospect of selling in a weaker domestic market, four dealers told Reuters.

New Delhi banned wheat exports on Saturday, just days after saying it was targeting record shipments of 10 MT this year, as a scorching heat wave reduced production and domestic prices hit a low record.

Only exports backed by letters of credit (LC) or payment guarantees issued before May 13 can proceed before the ban takes effect, India said.

But of the roughly 2.2 million tonnes of wheat currently in ports or in transit there, traders only have LCs for 400,000 tonnes, said a Mumbai-based dealer with a global trading company.

“Exporters don’t know what to do with the remaining 1.8 million tonnes. No one thought the government would simply ban exports,” said a dealer, who declined to be named due to the policy of the company.

A Mumbai-based trader said the ban could force him to declare force majeure for shipments to overseas customers.

“We bought wheat from traders and brought it to ports,” the trader said. “Our intention is to meet export commitments, but we cannot overrule government policy. Therefore, we have no choice but to declare force majeure.”

Global buyers were banking on supplies from the world’s second-largest wheat producer after exports from the Black Sea region plummeted following Russia’s February 24 invasion of Ukraine.

Importers such as Bangladesh, Indonesia and the United Arab Emirates may struggle to find alternative suppliers amid rising global prices.

The blunt ban will also make it harder for exporters to profitably sell inventory at ports.

They may have to resell these cargoes in the weaker domestic market, which has come under renewed price pressure since the export ban was announced, said a New Delhi-based trader with a global trading firm, and will also have to pay reloading and transportation costs.

Around 1.4 million tonnes of wheat are currently stuck in west coast ports such as Mundra and Kandla or in transit there, while around 8,000,000 tonnes more are in the ports of Kakinada, Tuticorin and Visakhapatnam on the east coast, traders said.

“Ship loading has stopped at a few ports. Thousands of trucks are waiting to unload at ports without any clarity,” the trader said.

Global trading houses are among those affected by the ban because in some transactions their Indian subsidiaries had sold the wheat to their regional headquarters in Singapore before obtaining the necessary letters of credit, an exporter said.

Strong export demand and the assumption that the government would support shipments of at least 8-10 million tonnes encouraged exporters to shift cargoes to ports after making purchases from farmers, a source said. New Delhi based dealer with global trading house.

Each trading house wanted to ship as much as possible before the end of June as crop movement becomes difficult once the monsoon rains resume, the dealer said.

“The Department of Commerce and even state governments were helping the exporters. The exports were profitable, so we never thought the government would do something like this,” he said.

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