India's export ban fallout: International wheat prices hit record high

International wheat prices jumped to a record high on Monday as an export ban by India, the latest country to use trade curbs to counter food inflation, threatened to further squeeze world wheat supply strained by the war in Ukraine.

The price, which was already high in the wake of Russia's invasion of major wheat exporter Ukraine, jumped to €435 ($453) per tonne as the European market opened. Benchmark futures in Chicago rose as much as 5.9 per cent to $12.475 a bushel, the highest in two months and within about $1 of the all-time high set just after Russia’s invasion. 

Wheat has contributed to record highs this year for global food prices as measured by the UN’s food agency, with Russia's invasion of Ukraine upending the market by halting massive shipments from Ukrainian sea ports.

India's embargo, prompted by a heatwave that has cut harvest prospects and sent domestic prices soaring, marks a policy U-turn after the government maintained just days earlier it was still targeting record exports of 10 million tonnes (mt) that would help compensate for Ukraine's reduced supply.

The authorities said they will allow existing export sales covered by letters of credit and government-to-government deals to meet food security needs.

While many traders and analysts had expected export curbs at some stage due to the worsening effects of the heatwave, the sudden announcement adds to pressure in the market for one of the world's most consumed cereals.

"It's a tight market and wheat stocks are going down, especially in exporting countries," Carlos Mera, head of agri commodities research at Rabobank, said.

“Wheat is a sensitive and politicised market, there are food security concerns in many countries.”

Facing spikes in food inflation, other nations have also sought to preserve domestic supply, with Indonesia banning exports of palm oil at the end of April.