The "big granary" suddenly tightened exports, causing a growing shortage of global food supplies, and analysts said "the next 12 months will be very challenging".

India, the world's second-largest wheat producer, abruptly banned wheat exports on Saturday, May 14, with immediate effect.

India's General Administration of Foreign Trade documents show that the Indian Trade Agency has revised its export policy related to wheat exports in order to ensure the food security of India and its neighbors. According to the document, the export of Indian wheat is banned and the ban will take effect immediately. However, exports that have been issued by letters of credit or approved by the Government of India may continue.

Last week, foreign media reported that India was "considering" restricting wheat exports as extreme weather damaged crops, which not only reduced the country's wheat production, but also undermined its export expectations, which is bound to exacerbate global food supply tensions.

Since the beginning of this year, wheat prices have risen 44%, while rice prices have risen 16%. Soaring food prices have had a great impact on food security in various countries.

G7 condemns the ban and warns of the global food crisis

The Group of Seven (G7) condemned India's export ban on April 14, Agence France-Presse reported.

German Federal Minister of Food and Agriculture Jem Ozdemir said at a press conference:

If everyone starts to impose export restrictions or close markets, that will worsen the crisis.

At the end of Germany's three-day meeting of foreign ministers of the Group of Seven, German Foreign Minister Anna Lena Belbock said that the G7 was urgently looking for alternative routes for Ukrainian food exports because the escalating situation in Russia and Ukraine exacerbated the risk of a global food crisis.About 25 million tons of grain are stranded in Ukrainian ports, a much-needed food for the world.

Western governments are looking for alternatives to sea routes. Belbock also said that usually about 5 million to 6 million tons of grain are exported through Ukrainian ports every month, and the G7 is "analyzing different railway lines so that we can ship food out as soon as possible."

Commodity prices have risen not only in Western countries but around the world, and nearly 50 million people in Africa and the Middle East are threatened by hunger, which will be particularly affected.

According to CCTV news, the G7 also issued a joint statement saying that the possibility of long-term delivery of weapons and other military equipment to the Ukrainian army could not be ruled out. If necessary, member states will provide Ukraine with sustained military and defense assistance in the coming years.

Food prices and the cost of aid provided by humanitarian agencies are rising, while 45 million people are on the brink of famine, the G7 said in a statement.

Soaring food prices worry the Indian government

Market speculation that India's temporary ban on wheat exports is mainly based on two considerations.

One is the high inflation in India.India's domestic inflation soared to its highest level in eight years, according to government figures released this week, and rising food prices worried policy makers: India's CPI rose 7.8 per cent in April from a year earlier, the highest level since 2014.

Fears of rapidly rising prices also prompted the Reserve Bank of India to raise interest rates unexpectedly this month for the first time in four years.

In addition, the sharp rise in international food prices caused by the conflict between Russia and Ukraine is also one of the reasons for India's temporary ban on wheat exports.India's General Administration of Foreign Trade pointed out in the document that the rise in international food prices has threatened the food security of India and its neighboring countries.

Indian wheat exporters have signed contracts for about 4 million tonnes of wheat in the previous two months, nearly 60 per cent of total wheat exports in the last fiscal year, due to soaring international food prices, according to local media. This is also one of the reasons for the rise in domestic wheat prices in India.

Industry insiders point out thatThe export ban imposed by India, one of the world's leading wheat producers, will effectively lower domestic wheat prices, but the export ban could further push up international food prices and exacerbate famine in poor countries dependent on imported commodities.

Traders expectTrading in the international wheat market will be chaotic when the market opens early next week, as the ban will hit buyers looking for wheat supplies.

According to the Financial Times, Swithun Still, a Swiss grain trader, said:

This is definitely a blockbuster. The wheat futures market will cause panic when it opens.

India, one of the world's largest wheat producers, had a bumper harvest last year, while other major wheat exporters, including Canada and Argentina, experienced bad weather.

India's wheat exports rose to a record high of more than 7 million tonnes in the year to March as the conflict between Russia and Ukraine almost halted exports from Ukraine. Before this export banIndia is expected to become one of the top ten wheat exporters in the 2022-2023 crop season. Analysts believe that the ban will create a major gap in global supply and demand, and wheat prices will rise further rapidly.

Recent hot and dry weather has also hurt India's production.Temperatures in most of India's wheat-producing areas reached 45 degrees Celsius in March and April, adding to concerns about the country's domestic supplies. Considering that there will be a few more weeks of hot weather before next month's annual monsoonThe Indian government recently cut its annual production forecast for the year to June by 5 per cent to 105 million tonnes.

However, there is also a view that although India is the world's second largest wheat producer, India basically produces and sells its own wheat, exports account for no more than 2% of the global wheat export market, and India's export ban has a limited impact on the global wheat market.

The United States forecasts that global wheat production will decline for the first time in four years.

On Thursday, the USDA released its first global forecast for the 2022-2023 crop season. The United States Department of Agriculture saysGlobal wheat production may decline for the first time in four yearsThis confirms concerns about further tightening of supply and rising food inflation.

The United States Department of Agriculture predicts that the total global wheat output will be 774.8 million tons in 2022-23.This is the first decline since 2018-2019.Global buffer stocks are expected to be 267 million tons, the second consecutive year of declineThe lowest level in six years.. Ukraine's wheat production will fall 35 per cent from last year to 21.5 million tons, a larger-than-expected decline.

The price of wheat went up with it.So far, Chicago wheat futures, the international benchmark, closed at $11.6725 a bushel, up 50% from the start of the year to $12 a bushel. The European wheat futures market closed at an average of 410.75 euros per ton, slightly below its all-time high in March. Wheat futures prices on the Euronext closed at a two-month high of 411.50 euros per ton.

India's wheat production is also expected to decline this year after five consecutive years of growth, while other countries with the highest wheat yields will see a decline at the end of the growing season and could exacerbate the tightening of global food supplies.

Referring to a report on the global food crisis released this month, the United Nations World Food Program (UN World food Programme) saidThe conflict in Ukraine has exposed the interrelated nature and fragility of the agricultural system with serious consequences for food security.The total number of people facing severe food insecurity reached a record 193 million in 2021.

The USDA also said production in key exporters, including the European Union, Argentina and Australia, could also fall slightly.

Analysts say unusually dry or hot weather has also raised concerns about production cuts in crop-producing countries such as France and India, while droughts in the US and Canada also worry farmers. According to the Financial Times, Matt Ammerman, an analyst at commodities broker StoneX, said:

The world needs good weather, but we don't have it.

Carlos Mera, an analyst at Rabobank, said: "the USDA has made it clear that we are moving towards a global food crisis.The next 12 months will be very challenging.”

Some commentators pointed out thatThere is another factor that could bring more chaos to global food markets-food protectionism. The order of impact is: energy crisis, food protectionism, economic blockade and global famine. At presentThe share of global restricted food trade (in calorie terms) has risen sharply, to 17 per cent, similar to the level seen during the global food and energy crisis of 2007-2008. If countries continue to restrict food exports, the crisis could worsen.