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Wednesday, 18 May 2022

India to ease wheat export restrictions (slightly)

India softens wheat ban after sparking panic among traders: India will allow the export of wheat shipments that are waiting for customs clearance, easing restrictions announced last week that threaten to aggravate global food shortages, the government said in a statement yesterday. All shipments registered with customs before 14 May will be allowed to leave the country in addition to cargoes under existing letters of credit.

REFRESHER- On Saturday, India announced a ban on wheat exports to all except vulnerable countries in response to rising domestic prices and a weaker-than-expected harvest. The restrictions have heaped pressure on global food markets and caused chaos in India, where L/Cs accounted for less than 20% of the cargoes waiting at the country’s ports, according to Reuters.

We could be a candidate for an exemption: Egypt is currently in talks with India to be made exempt from the ban after New Delhi said last week that vulnerable developing countries may be permitted to continue purchasing wheat. As the world’s largest importer of wheat, Egypt has been hit hard by the grain shortage triggered by the Russia-Ukraine war. We usually source north of 80% of our wheat imports from the two countries, and are facing at least an additional EGP 15 bn burden on this year’s fiscal budget as a result of spiraling grain prices.

We’ve locked in at least one shipment from India: The country has approved a 61.5k-ton wheat shipment to Egypt upon a request from our government, India said in the statement yesterday. It is unclear whether this is the same 55k-ton shipment — our first from the country — that had already passed the inspection of Egyptian officials.

But the fate of the 500k-ton purchase is unclear: Supply Minister Ali El Moselhy said Monday that agreement to buy 500k tons of Indian wheat will not be impacted by the ban, but clarified yesterday that the purchase has been agreed but not signed, Reuters reported. “We have agreed but we haven’t made the contract,” the minister said, reiterating that it would not be impacted by the ban. India’s statement doesn’t mention the purchase, and it’s not clear at what stage of delivery it currently stands.

The story is getting attention in the foreign press: Reuters and Bloomberg had the story.

FROM THE DEPT. OF BAD NEWS-

Some 300k tons of wheat booked for February and March delivery for Egypt are stranded in Ukrainian ports, traders told Reuters. One cargo is still stuck in port while four others are yet to be loaded, they said.

GASC isn’t letting contractors off the hook: State grain buyer GASC has granted an extension to secure the shipments, which were purchased before Russia invaded Ukraine and blockaded its ports. However, GASC is not planning to release traders from fulfilling the shipments due to force majeure (unforeseeable circumstances), the traders said, adding that GASC’s tender book does not include a force majeure clause. The Grain and Free Trade Association (GAFTA) could arbitrate in the case of any disputes, one trader added.

The wheat will have to come from somewhere: GASC is requiring delivery of the four unloaded cargoes, even if it has to be secured from other origins, the newswire reports traders as saying.

Is stranded Ukrainian wheat being counted in our reserves figures? Potentially, according to traders, who told the newswire that the reserves figures are calculated on the basis of purchases rather than fulfilled deliveries. Prime Minister Moustafa Madbouly said this week that the government currently has enough wheat reserves to cover four months, up from 2.6 months in early April.

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