As expected global wheat prices jumped sharply Monday in the wake of Indian’s surprise ban on exports of the key grain from last Saturday.
Chicago wheat futures hit the daily 70-US cent trading limit cap on Monday after the ban which has exacerbated fears about global supplies strained by Russia’s invasion of Ukraine and crop and export shortfalls in Australia, France and the US.
The wheat surge spilled over into the prices of corn, soybeans and other grains and oilseeds already hit by Indonesia’s ban on palm oil exports.
“It just exacerbates the food shortage risk, particularly for developing nations and those historically dependent on foodstuffs out of that region,” said Robert Rennie, global head of market strategy at Australian bank Westpac.
Chicago Board of Trade’s (CBOT) soft red winter wheat deferred months all hit contract highs. And contract highs were hit across the board for Kansas City (KC). hard red winter wheat and MGEX spring wheat futures, as well.
The most-active CBOT soft red winter wheat contract settled the day up the daily trading limit of 70 cents at $US12.47-1/2 a bushel a rise of 5.9% for the day and $US1.16 a bushel off the trading session $US13.63.50 record hit after the invasion of Ukraine.
Reuters reported that the daily trading limits for CBOT wheat futures will expand to $US1.05 for Tuesday’s session.
India’s embargo came on top of the halt to exports of wheat and other grains and seeds (sunflower especially) from late February. Drought in the southern US Plains and parts of France, plus the impact of heavy rain and flooding in some wheat growing areas of Australia has slashed forecast exports and end of season stocks.
Tobin Gorey, director of agricultural strategy at Commonwealth Bank of Australia, said the wheat export ban would be a “shape shifter” for global markets.
“The trade will likely need to replace at least some Indian wheat in the pipeline,” Gorey said. “We suspect that will create an initial flurry of trading but the market will take some time to assess the details.”
The export ban was announced just days after the US Department of Agriculture (USDA) forecast that global wheat production would drop for the first time in four years in 2022-23.
The USDA surprised by forecast the lowest US wheat exports in four years because of a combination of dry weather and small plantings as some farmers switch to easier to grow soybeans (which use less increasingly expensive fertilisers).
Most-active CBOT corn ended up 28.25 cents to $US8.09.50 a bushel, while soybeans settled up 10 cents at $US16.56.50 a bushel.