Wheat traders in limbo after govt’s sudden export ban
NEW DELHI: Wheat traders and brokers say they are staring at losses amidst a fall in domestic prices due to the government’s decision to ban exports on May 13, as thousands of wheat-laden trucks prepared to return from ports and stockpilers searched for buyers.
Some agents said they were considering selling stocks to the government. Ports, such as Kandla in Gujarat’s Kutch, where wheat had been piling up are now choked with thousands of trucks preparing to return with stocks meant for sale overseas. Brokerages said traders hoping to get mandatory credit guarantees, officially called letters of credit, and other clearances when the government suspended overseas sales are frantically looking for buyers.
India, the world’s secondlargest wheat grower, said on May 13 it was banning private exports to manage its food security which is “at risk”, keeping a window open for overseas shipments only on the specific request of a foreign government to “meet their food security needs”.
Only traders who had secured credit guarantees on or before May 13 are now allowed to export wheat.
“Trucks are not being unloaded and we are waiting for instructions on what to do,” said Satbir Singh, an official of the Gandhidham Goods Transport Association from Kutch.
The country’s move to ban overseas sales sent global wheat prices to a record high on Monday, as Chicago Board of Trade wheat futures leapt 6%, a two-month high. India’s ban will exacerbate a global shortage and could drive up prices even more, analysts said.
There is no respite for traders who have over 40,000 tonne already at various ports and do not have letters of credit for exports, said Mohit Upadhyay, partner of trading firm HMV Agro. Trucks returning from ports would entail an additional expenditure of ₹1.5-2 lakh, he said. Nearly 7,000 trucks with about 200,000 tonnes, from traders who had applied for credit guarantees were stuck across ports over the weekend, according to a truckers’ association.
A fall in domestic prices of wheat by up to 19% due to the export ban has prompted many traders in Uttar Pradesh who were stockpiling wheat for exports to now look to sell to the government at minimum support prices to pare losses, a trader from the state’s Barabanki said, requesting anonymity.
“Farmers who held on to stocks hoping to sell at a premium, anticipating export demand, now have no option but to sell to the government at MSP rates. This is expected to increase the government’s stocks through procurement,” said Ashok Agrawal of Comtrade.
Prices of wheat have declined at spot markets, selling at ₹2,120 a quintal (100kg) at Delhi’s Najafgarh and ₹2,025 at Bareilly on Wednesday, according to Agriwatch, a commodity tracker. Most traders who stockpiled for anticipated exports bought wheat at ₹2,400-2,600 from farmers against the government’s price of ₹2,015.