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Wheat exporting firms are backing out of contracts in the domestic market following India’s export ban, with ITC Ltd being one of those firms declaring force majeure for consignments delivered at port locations.
Wheat prices in private trade are quoted above ₹2,100 a quintal barring a couple of places. At the agricultural produce marketing committee (APMC) yards, the weighted average modal price (rates at which most trades take place) is at least ₹50 a quintal higher than the minimum support price (MSP) of ₹2,015 fixed for this year.
Unusual development
ITC, in a letter to suppliers and brokers, said purchase contracts with them had been entered for wheat exports from India. But the ban on the grain’s export has resulted in a force majeure event. “...all our balance contracts with you stands cancelled at par with immediate effect,” the firm said.
An ITC official admitted that it had declared force majeure, an unusual development that prevents a person from fulfilling a contract, on its domestic purchase contracts but said it would be difficult to share more details.
A trader who shared the details of the cancellation of contracts said a few others were backing out of their contracts, resulting in trucks loaded with wheat piling up at some places.
Growers counselled
One trader said companies such as ITC could have used the wheat for its flour manufacturing or even producing bread. An official of a multinational export-import company said wheat consignments, which were banned from exports and the cancelled lots, were of superior quality.
A Mumbai-based exporter said some sort of panic was setting in among growers but they have been counselled to hold back their produce as prices could tend to rule higher during the latter part of the year.
Commerce Ministry officials said they did not have any details of the cancelled contracts in the domestic market.
As a result of these developments, wheat arrivals between May 15, the day after the ban was imposed, and May 22, have almost doubled to 7.59 lakh tonnes (lt) against 3.95 lt during the year-ago period.
Uttar Pradesh and Madhya Pradesh have contributed to the higher arrivals with 4.13 lt and 2.45 lt, respectively. During the same time last year, both these States were again the top two contributors with 1.59 lt and 1.14 lt, respectively.
Wheat delivery to South
On Monday, the National weighted average modal price was ₹2,081, a four-day high, while arrivals by noon had topped 50,000 tonnes.
A New Delhi-based trader said wheat was being delivered in South India at a price above ₹2,300 a quintal.
Though the ban on exports will bring down prices, traders and millers say wheat prices will rule still above the MSP this year. “It is unlikely that mills will be able to source wheat from the Food Corporation of India (FCI) under the open market sale scheme (OMSS) this year due to low procurement. They will have to buy wheat from the open market for their needs. This will keep prices above MSP,” said a New Delhi-based analyst.
The Centre announced the ban on wheat exports as domestic production was feared to be lower than the initial record estimate of 111.32 million tonnes (mt). On May 22, the Ministry of Agriculture revised its estimate to 106 mt.
FCI procurement
Over 50 per cent lower procurement by FCI year-on-year (18.2 mt until last week), high demand for exports and rising inflation also forced India to bar wheat shipments.
FCI procurement, which is done only at MSP, was affected as domestic wheat prices ruled higher than the support price even before arrivals in view of the export demand.
Globally. wheat prices are currently lower than $12 a bushel after having soared to a 14-year-high of $12.8 last week. Prices have tended to ease from last weekend as the UN said it would come out with a plan to revamp wheat exports
Wheat prices have nearly doubled after the Russia-Ukraine war as both these nations contribute to 30 per cent of the global supply. This resulted in demand for Indian wheat, which is discounted in the global market, and before the ban, it was sold at least $50 a tonne lower than other origins such as Europe and Argentina.
Currently, wheat from Europe at $455 a tonne is the most competitive, followed by US Soft Red Winter wheat at $466 and Argentine wheat at $475.
Meanwhile, a ship carrying 32,500 tonnes of Indian wheat arrived at Chittagong port in Bangladesh, while another ship laden with 65,000 tonnes of wheat left Kandla for Egypt during the weekend. This is India’s first export to the African nation.
Wheat deals
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