May 18, 2022

 

1.8 million tonnes of wheat stuck in India's ports due to export ban

 

 

Four dealers said about 1.8 million tonnes of wheat are stuck in India's ports due to an export ban imposed on the grain, resulting in traders facing hefty losses from possibly selling to a weaker local market, Reuters reported.

 

As a searing heat wave limited output and pushed local prices hit a record high, the Indian government imposed a ban on wheat exports, just days after stating the country could reach record shipments of 10 million tonnes this year.

 

India said that only shipments backed by letters of credit (LCs) or payment guarantees issued before May 13 would be allowed to export before the ban takes effect.

 

However, merchants have LCs for just 400,000 tonnes of the 2.2 million tonnes of wheat now at ports or in transit, according to a Mumbai-based dealer with a global trading business.

 

One dealer, who declined to be identified, said the remaining 1.8 million tonnes are causing consternation among exporters. Nobody expected the government to outright prohibit exports.

 

According to one Mumbai-based dealer, the ban may compel the company to declare force majeure on shipments to foreign customers.

 

The dealer said they bought wheat from traders and transferred it to ports to meet export obligations, but they cannot override government policy.

 

After shipments from the Black Sea area plummeted following Russia's invasion of Ukraine on February 24, global customers were counting on supplies from India, the world's second-largest wheat grower.

 

Bangladesh, Indonesia, and the United Arab Emirates, for example, may struggle to find alternative supplies if global costs rise.

 

The sudden ban would also make it more difficult for exporters to successfully sell supplies stuck at ports with profit.

 

According to a New Delhi-based trader with a global trading business, they may have to resell those cargoes into the weaker local market, which has been under renewed pricing pressure since the export ban news broke, and will also have to pay for reloading and transportation charges.

 

Around 1.4 million tonnes of wheat is presently delayed or in transit at west coast ports like Mundra and Kandla, while another 800,000 tonnes is in east coast ports like Kakinada, Tuticorin, and Visakhapatnam, according to merchants.

 

According to one exporter, global trading firms are among those hit by the prohibition since their Indian operations supplied wheat to their regional headquarters in Singapore before obtaining the appropriate LCs in some transactions.

 

A New Delhi-based dealer with a global trading company said exporters were urged to transport cargoes to ports after completing purchases from farmers because of strong export demand and the expectation that the government will facilitate shipments of at least 8 million to 10 million tonnes of grain.

 

According to the dealer, every trade firm wants to export as much as possible before the end of June since crop movement becomes harder after monsoon rains begin.

 

-      Reuters