The government said it would still allow exports backed by already issued letters of credit and to countries that request supplies “to meet their food security needs.”

The move to ban overseas shipments was not in perpetuity and could be revised, senior government officials told a press conference.

Global buyers were banking on supplies from the world’s second-biggest wheat producer after exports from the Black Sea region plunged following Russia’s Feb. 24 invasion of Ukraine. Before the ban, India had aimed to ship a record 10 million tonnes this year.

The officials added that there was no dramatic fall in wheat output this year, but unregulated exports had led to a rise in local prices.

“We don’t want wheat trade to happen in an unregulated manner or hoarding to happen,” commerce secretary BVR Subrahmanyam told reporters in New Delhi.

Although not one of the world’s top wheat exporters, India’s ban could drive global prices to new peaks given already tight supply, hitting poor consumers in Asia and Africa particularly hard.

“The ban is shocking,” a Mumbai-based dealer with a global trading firm said. “We were expecting curbs on exports after two to three months, but it seems like the inflation numbers changed the government’s mind.”

Rising food and energy prices pushed India’s annual retail inflation near an eight-year high in April, strengthening expectations that the central bank would raise interest rates more aggressively.

Wheat prices in India have risen to record highs, in some spot markets hitting 25,000 rupees (C$417) per tonne, well above the government’s minimum support price of 20,150 rupees.

Rising fuel, labour, transportation and packaging costs are also boosting the price of wheat flour in India.

“It was not wheat alone. The rise in overall prices raised concerns about inflation and that’s why the government had to ban wheat exports,” said another senior government official who asked not to be named as discussions about export curbs were private. “For us, it’s abundance of caution.”

Smaller crop

India this week outlined its record export target for the fiscal year that started on April 1, saying it would send trade delegations to countries such as Morocco, Tunisia, Indonesia and the Philippines to explore ways to boost shipments.

In February, the government forecast production of 111.32 million tonnes, the sixth straight record crop, but it cut the forecast to 105 million tonnes in May.

A spike in temperatures in mid-March means the crop could instead be around 100 million tonnes or even lower, said a New Delhi-based dealer with a global trading firm.

“The government’s procurement has fallen more than 50%. Spot markets are getting far lower supplies than last year. All these things are indicating lower crop,” the dealer said.

Cashing in on a rally in global wheat prices after Russia invaded Ukraine, India exported a record seven million tonnes of wheat in the fiscal year to March, up more than 250 per cent from the previous year.

“The rise in wheat price was rather moderate, and Indian prices are still substantially lower than global prices,” said Rajesh Paharia Jain, a New Delhi-based trader.

“Wheat prices in some parts of the country had jumped to the current level even last year, so the move to ban export is nothing but a knee-jerk reaction.”

Despite a drop in production and government purchases by the state-run Food Corporation of India (FCI), India could have shipped at least 10 million tonnes of wheat this fiscal year, Jain said.

The FCI has so far bought a little over 19 million tonnes of wheat from domestic farmers, against last year’s total purchases of a record 43.34 million tonnes. It buys grain from local farmers to run a food welfare programme for the poor.

Unlike previous years, farmers have preferred to sell wheat to private traders, who offered better prices than the government’s fixed rate.

In April, India exported a record 1.4 million tonnes of wheat and deals were already signed to export around 1.5 million tonnes in May.

“The Indian ban will lift global wheat prices. Right now there is no big supplier in the market,” another dealer said.

— Reporting for Reuters by Rajendra Jadhav in Mumbai and Mayank Bhardwaj in New Delhi; additional reporting by Nupur Anand.

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April is the first month of the fiscal year. India, the world’s second biggest wheat producer, exported a record seven million tonnes of the grain in fiscal 2021-22.

India is the only major supplier of wheat at this time of year, and its exports of the grain have surged since Russia invaded Ukraine in late February.

It exported just 242,857 tonnes of wheat in April 2021.

With the new season crop gathered in April, wheat shipments could rise further this month.

“In May, shipments could rise to 1.5 million tonnes,” said a New Delhi-based dealer with a global trading firm. “Wheat supplies and railway cars’ availability have improved in the last few weeks and that will help ship out more wheat in May.”

Buyers from Asia and the Middle East are purchasing Indian wheat, as it is cheaper than alternatives, he said.

India has exported wheat to South Asia, Southeast Asia, the Middle East, Europe, and North Africa.

As supplies dropped from Ukraine and Russia, which together used to account for about 29 per cent of global wheat exports, top wheat importer Egypt agreed for the first time to purchase the grain from India.

India also exported wheat to other new markets such as Israel, Turkey, Indonesia, Mozambique, and Tanzania, traders said.

In addition, the United Nations’ World Food Programme sourced wheat from India to supply to Somalia, Kenya and Djibouti, they added.

In April, Indian traders signed wheat export deals at between US$295 and US$340 a tonne free on board, said Rajesh Paharia Jain, a New Delhi-based trader.

— Reporting for Reuters by Mayank Bhardwaj and Rajendra Jadhav.

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The drop could curb Indian exports of the staple. Cashing in on a rally in global wheat prices after Russia invaded Ukraine, India exported a record 7.85 million tonnes in the fiscal year to March — up 275 per cent from the previous year.

Expecting another record crop, traders and government officials saw an opportunity to export 12 million tonnes in the current 2022-23 fiscal year.

In mid-February, nearly a month before the recent hot spell, the government said India was on course to harvest an all-time high 111.32 million tonnes of the grain, up from the previous year’s 109.59 million tonnes

The government is yet to formally revise its production estimates, but an official note, seen by Reuters, said the output could fall to 105 million tonnes this year.

“Loss of production of wheat, all India basis, more or less stands around six per cent, on account of shrivelling of wheat grains around 20 per cent due to terminal heat and heat waves,” the note said.

In 2022, India recorded its warmest March in 122 years with the maximum temperature across the country rising to 33.1 C, nearly 1.86 C above normal, according to data compiled by the state-run India Meteorological Department.

“We’ve some initial idea but it’s a little early to fully understand the extent of crop loss,” said a senior government official who keeps tabs on planting and harvests.

He declined to be named as he’s not authorised to talk to the media.

At this stage, no one has a clear idea about the crop size, said Rajesh Paharia Jain, a New Delhi-based trader. “It’s a dynamic situation, so we will have to wait for a while to see a clearer picture,” Jain said.

Exports at risk

“Based on the production estimates issued by the government in February, we could have easily exported much more than 12 million tonnes, but it now looks like we’ll be exporting around 10 million tonnes,” he said.

Even with the warm weather, India’s wheat exports could easily cross last year’s shipments, the government official said.

Some traders are more pessimistic, projecting as much as a 10 per cent drop in output.

“Dwindling supplies in spot markets are indicating a bigger drop in the production. I think production could be down 10 per cent to around 100 million tonnes,” said the India head of global trading firm, who declined to be named.

The government could restrict exports if production sank come closer to such level, he said.

Addressing the Indian diaspora in Berlin, Indian Prime Minister Narendra Modi said currently many countries are struggling with a severe shortage of wheat.

“Big nations are worried about food security, and at this time India’s farmers are coming forward to feed the world,” Modi said.

Before the nearly 50 per cent surge in global wheat prices, those paid by the state-run Food Corporation of India (FCI) exceeded world prices, making exports unattractive.

Now, private traders are actively buying wheat from Indian farmers for exports.

So far this year, FCI’s wheat purchases are 38 per cent lower than the previous year, according to official data, indicating both higher purchases by private traders for exports and some drop in crop output as well.

Local prices have gone up by 15 per cent in some markets, said a Mumbai-based dealer with a foreign trading firm, in another potential sign of more buying for exports and tighter supply.

— Reporting for Reuters by Mayank Bhardwaj, Rajendra Jadhav and Neha Arora.

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India, the world’s second biggest wheat producer, is prepared to meet any extra demand for wheat from buyers in south Asia and Southeast Asia, and also from countries further afield in Europe, West Asia and North Africa. Ukraine is a major producer of grains but exports have been disrupted since the Russian invasion in February.

“The Indian market has sufficient stocks, and India is in a comfortable position to meet requests from wheat-importing countries,” Sudhanshu Pandey, the most senior civil servant at the ministry of consumer affairs, food and public distribution, told Reuters in an interview.

India’s new season wheat harvest is underway, with this year’s production pegged at a record 111.32 million tonnes — making it the sixth season in a row that the country has produced a surplus.

India needs at least 25 million tonnes of wheat each year to run a food welfare program.

Last year, the government bought a record 43.34 million tonnes of wheat from domestic farmers, substantially higher than the amount it needs for the welfare program.

This year government purchases are likely to fall because private traders are offering farmers a higher price for wheat than the government’s price of 20,150 rupees (C$336) a tonne — leaving a bigger surplus for export.

“We have to meet our own requirement for the PDS and then the rest is available for global exports,” Pandey said, referring to the public distribution system, or food welfare program that supplies around 25 million tonnes of subsidized wheat to the poor.

Pandey said if there is enough wheat for the poor, the Indian government is “happy” to see farmers getting attractive prices from private traders who have been actively buying from growers to meet rising global demand.

Wheat stocks at government warehouses totalled 19 million tonnes on April 1, he said, significantly higher than a target of 7.46 million tonnes.

Pandey said the government was encouraging wheat exports by asking port and railway authorities to give priority to outbound wheat cargoes.

India’s wheat exports hit 7.85 million tonnes in the fiscal year to March, an all-time high and a sharp increase from 2.1 million tonnes in the previous year.

Sugar surplus

Pandey said India’s sugar exports are expected at a record 8.2 million tonnes in the current 2021-22 season, higher than last year’s 7.2 million tonnes.

Indian sugar mills have already contracted to export around seven million tonnes in 2021-22, he said.

Still, India’s sugar inventories on Oct. 1, 2022, when the next season begins, are expected at around seven million tonnes, Pandey said, against 8.2 million tonnes on Oct. 1, 2021.

“This year’s (sugar) production is at a record of almost 35 million tonnes, and our domestic requirement is about 26-26.5 million tonnes, so you can very clearly see that we have a surplus from the current year’s production. And then we have stocks of 8.2 million tonnes from last year,” Pandey said.

Explaining New Delhi’s efforts to cut its reliance on expensive vegetable oil imports, Pandey said the long-term solution lies in raising India’s domestic output, and the government is working on a plan to encourage farmers to grow more oilseeds.

— Reporting for Reuters by Mayank Bhardwaj and Rajendra Jadhav.

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Egypt, often the world’s biggest wheat importer, is reeling from a surge in bread and flour prices after Russia’s invasion of Ukraine closed off access to lower-priced Black Sea wheat.

India, the world’s second biggest wheat producer, has emerged as a leading supplier of the grain to a host of countries that are struggling with cargo disruptions and sky-high grain prices in the wake of the crisis in the Black Sea region.

Although Egypt has been a traditional buyer of Russian and Ukrainian wheat, India is willing to help Cairo by supplying the grain, said the sources, who didn’t wish to be identified in line with official rules.

Egypt could buy up to 12 million tonnes of Indian wheat, they said.

The Egyptian delegation would meet potential Indian buyers, examine logistical and other issues and assess various grades and quality of Indian wheat, the sources said.

“India is in a position to supply top-quality wheat to Egypt and meet Egypt’s quality and other requirements,” said one of the sources.

On Tuesday, Piyush Goyal, India’s minister for commerce and industry, consumer affairs and food and public distribution said he met Hala Elsaid, Egypt’s minister for planning and economic development, in Dubai and discussed New Delhi’s “readiness to supply high-quality wheat” to Cairo.

One of India’s state-run export promotion bodies would assist the Egyptian delegation, the sources said.

On Monday, Egypt’s Prime Minister Moustafa Madbouly said Cairo was counting on France to secure some supplies of basic commodities such as wheat.

Egyptian Supply Minister Ali Moselhy on Thursday said Egypt is in talks with Argentina, India, France and the U.S. for future wheat imports but is in no rush to buy at the moment.

He said Indian suppliers would still have to seek accreditation from state buyer the General Authority for Supply Commodities (GASC).

Earlier this month Egypt set a fixed price for unsubsidized bread to battle a sharp rise in bread prices that jumped 25 per cent to 1.25 Egyptian pounds (6.8 Canadian cents) per loaf in some bakeries.

— Mayank Bhardwaj reports for Reuters from New Delhi.

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Modi’s decision is a significant climb-down for the combative leader and comes as state elections in politically important grain-belt states loom.

The legislation — three laws introduced in September last year — was aimed at deregulating the sector, allowing farmers to sell produce to buyers beyond government-regulated wholesale markets where growers are assured of a minimum price.

Farmers, fearing the reform would cut the prices they get for their crops, staged nationwide protests that drew in activists and celebrities from India and beyond, including climate activist Greta Thunberg and pop singer Rihanna.

“Today I have come to tell you, the whole country, that we have decided to withdraw all three agricultural laws,” Modi said in an address to the nation.

“I urge farmers to return to their homes, their farms and their families, and I also request them to start afresh.”

The government would repeal the laws in the new session of parliament, starting this month, he said.

The concession on laws the government had said were essential to tackle chronic wastage and inefficiencies comes ahead of elections early next year in Uttar Pradesh, India’s most populous state and long a key political battleground, and two other northern states with large rural populations.

Modi’s capitulation leaves unresolved a complex system of farm subsidies and price supports that critics say the government cannot afford.

It could also raise questions for investors about how economic reforms risk being undermined by political pressures.

Protesting farmers, who have been camped out in their thousands by main roads around the capital, New Delhi, celebrated Modi’s back-track.

“Despite a lot of difficulties, we have been here for nearly a year and today our sacrifice finally paid off,” said Ranjit Kumar, a 36-year-old farmer at Ghazipur, a major protest site in Uttar Pradesh.

Jubilant farmers handed out sweets in celebration and chanted “hail the farmer” and “long live farmers’ movement.”

Rakesh Tikait, a farmers’ group leader, said the protests would only be called off when parliament repealed the laws.

Vulnerable to big business

Modi’s Bharatiya Janata Party (BJP) government said last year there was no question of repealing the laws. It attempted to break the impasse by offering to water down the legislation but protracted negotiations failed.

The protests took a violent turn on Jan. 26, India’s Republic Day, when farmers overwhelmed police and stormed the historic Red Fort in New Delhi after tearing down barricades and driving tractors through roadblocks.

One protester was killed and scores of farmers and policemen were injured.

Farmers say the changes would make them vulnerable to competition from big business and they could eventually lose price support for staples such as wheat and rice.

The government says reform of the sector, which accounts for about 15 per cent of the US$2.7 trillion economy, would have meant new opportunities and better prices for farmers.

Modi announced the scrapping of the laws in a speech marking the birth anniversary of Guru Nanak, the founder of Sikhism. Many of the protesting farmers are Sikh.

He acknowledged that the government had failed to win the argument.

The farmers are also calling for minimum support prices for all of their crops, not just rice and wheat, a new demand that has gained traction among farmers across the country.

Some agriculture experts said Modi’s reversal was unfortunate because the reforms would have brought new technology and investment.

“It’s a blow to India’s agriculture,” said Sandip Das, a New Delhi-based researcher and agricultural policy analyst.

“The laws would have helped attract a lot of investment in agricultural and food processing — two sectors that need a lot of money for modernization.”

The Confederation of Indian Industry (CII), a group that represents top corporations, had pinned hopes on the laws to pave the way for modernizing India’s decrepit post-harvest infrastructure.

Also, the US$34 billion domestic food processing sector would have grown exponentially, thanks to the laws, according to CII.

Another industry body, the Federation of Indian Chambers of Commerce and Industry, late last year said the laws should spur startups, and technological interventions would help cut wastage and bring efficiency in the agriculture sector.

Seizing on opportunities, global and Indian venture capitals have already started funding agritech startups that aim to run the entire food supply chain, currently prone to massive wastage, often as high as four to five times that of most large economies, experts say.

Anil Ghanwat, head of a farmers’ union and a member of a Supreme Court-appointed farm panel, said the laws promised farmers freedom from middlemen and their repeal would leave them open to old exploitation.

The opposition has been keen to take advantage of the acrimony between farming communities and Modi’s party and Rahul Gandhi of the main opposition Congress party, said the “arrogant” government had been forced to concede.

“Just the beginning of many more victories for people’s voices,” Mahua Moitra, a lawmaker from the Trinamool Congress Party and one of Modi’s staunchest critics, said on Twitter.

State elections are also due soon in Punjab and Uttarakhand in the north.

Modi’s party looks well placed to fend off challenges in the next general election, due by 2024, but in a worrying sign for him, a regional party swept to power in West Bengal state in May.

— Reporting for Reuters by Mayank Bhardwaj, Rajendra Jadhav and Krishna N. Das; additional reporting by Shilpa Jamkhandikar.

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In India, the world’s biggest rice exporter, the conventional method of rice cultivation requires farmers to sow seeds in nurseries and then wait for 20 to 30 days before manually transplanting the seedlings into plantation fields that are ankle-deep in water.

With the new seed varieties, developed by the state-run Indian Agricultural Research Institute, farmers only need to irrigate the field once to moisten the soil before sowing the rice.

The conventional cultivation method also uses a lot of water to control weeds as herbicides are costly and often do not distinguish between the rice and the unwanted vegetation.

Government scientists said the new rice varieties contain a gene that would allow farmers to spray a common, inexpensive herbicide without worrying about any side effects.

“Our focus is very high on more nutritious seeds, that can be adopted to new conditions, especially in changing climates,” Modi said.

Water conservation is likely to be the main attraction of the new rice varieties in India, where farmers rely heavily on monsoon rains.

The conventional method uses 3,000 to 5,000 litres of water to produce one kilogram of rice. The new varieties could cut water use by at least 50-60 per cent, farmers and government officials say.

“For farmers like us, the main concern was the management of weeds, and the new varieties take care of that concern,” said Ravindra Kajal, who grows rice on his nine-acre plot in the northern state of Haryana.

India is also the world’s biggest rice producer after China.

— Mayank Bhardwaj reports for Reuters from New Delhi.

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India is the world’s biggest vegetable oil importer and spends an average of $8.5-$10 billion annually on edible oil imports.

The country produces less than half of the roughly 24 million tonnes of edible oil that it consumes annually. It imports the rest, buying palm oil from Indonesia and Malaysia, soyoil from Brazil and Argentina, and sunflower oil, mainly from Russia and Ukraine.

India does export agricultural commodities such as sugar and rice on the world market, but domestic oilseed production is nearly six times lower than rice and wheat on average.

“The government will invest more than 110 billion rupees via the National Mission on Oilseeds and Oil Palm to provide farmers everything possible, including better seeds and technology,” Modi said on Twitter.

“When India is emerging as a major exporter of farm goods, we should not depend on imports for our edible oil requirements,” Modi said.

India’s vegetable oil imports have surged to 15 million tonnes from 4 million only two decades ago, according to traders and industry officials. They said imports could reach 20 million by 2030, boosted by a growing population with higher incomes and a taste for calorie-laden curry and fried food.

Atul Chaturvedi, president of the Solvent Extractors Association of India, an industry body, said it was a giant step to help India to become self-sufficient in edible oil.

Earlier this year, Reuters reported that India was expected to announce a five-year plan to cut vegetable oil imports by providing farmers with financial incentives to switch to oilseeds from grains.

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In a standoff between riot police and the farmers, authorities tried to clear a protest site in the city’s east but most farmers refused to move and their leaders said any retreat would constitute surrender.

“Concerned over police high-handedness, thousands of farmers, who were not part of the protest, have now come to bolster our movement,” Rakesh Tikait, president of one of the largest farmer unions, the Bharti Kisan Union, told Reuters on Friday.

Prime Minister Narendra Modi’s government introduced the new agricultural laws in September, triggering a wave of protests and sit-ins on some of the major approaches to New Delhi.

Farm leaders say the laws are an attempt to erode a longstanding mechanism that ensures farmers a minimum support price for their rice and wheat.

The government says the reforms will open up new opportunities for farmers and it says it will not bow to the protesters’ demands.

Modi retains a solid majority in parliament although the protests are beginning to undermine some support for the government in the countryside and play on old loyalties.

Farmer leaders have accused authorities of acting at the behest of politicians affiliated with Modi’s ruling Bharatiya Janata Party.

Union leader Tikait comes from a politically influential farming community in Uttar Pradesh, India’s most populous state in the north. In several villages, members of the dominant Jat community will gather on Friday to support the protest.

The protest turned violent on Tuesday, when India celebrated its Republic Day with a military parade, when some protesters broke away from a procession of tractors to break through barricade and clash with police.

— Reporting for Reuters by Mayank Bhardwaj; additional reporting by Devjyot Ghoshal and Danish Siddiqui.

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The cornerstone of the reform, introduced in September, allows private buyers to deal directly with farmers.

Angry farmers, who say that will make India’s traditional wholesale markets irrelevant and leave them at the mercy of big retailers and food processors, have camped out on major highways outside New Delhi for more than two months.

Agriculture and Farmers Welfare Minister Narendra Singh Tomar said the government was open to suspending the laws for up to 18 months, during which time representatives of the government and farmers should work to “provide solutions” for the industry.

Bilateral talks have so far failed to break the deadlock — landing Prime Minister Narendra Modi with one of his most significant challenges since he was re-elected in 2019.

The next round of talks is due on Friday, and farm leader Dharmendra Malik said the unions would let the government know then if they would accept the offer and call off the protests.

The government was “sympathetic to farmers’ concerns and is trying to end the stalemate,” it said in a statement, thanking them for maintaining “peace and discipline” during the protests.

Farmers plan a tractor rally through New Delhi on Tuesday, India’s Republic Day, which the Supreme Court on Wednesday declined a government petition to ban.

— Reporting for Reuters by Mayank Bhardwaj; additional reporting by Suchitra Mohanty and Nigam Prusty.

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