India's wheat export ban pushes Australian FOB price to record high

India's wheat export ban announced May 13 to ensure sufficient availability of wheat in domestic markets pushed the Australian wheat price to a record high May 17.

Amid uncertainty around Indian exports, S&P Global Commodity Insights assessments for West Australia APW hit a record high of $458/mt on May 17, rallying $18/mt on the day, while ASW closed at $426/mt, $16/mt higher on the day.

As a result of the ban, wheat and flour prices in Indonesia have increased, sources said.

One Indonesian flour mill raised prices by about 2% to Rupiah 171,000/25 kg bags, but "the price increase is out of step [with the current market] and [was] planned two weeks ago," one source said. Prices of flour will need to be raised further because of the current Indian ban, an Indonesia-based source added.

At least one Indonesia buyer has received notices of force majeure but declined to be named.

There have been no reported inquiries from buyers to cover Indian wheat purchases as the situation is still fluid and several market participants remain hopeful that the shipments will not be disrupted, sources said.

Meanwhile, Australia wheat could be sourced to cover these shorts, but prices have soared on the news from India.

FOB offers from South Australia were first reported at $485/mt for July-August shipments at the start of the day but by the end of the day May 17, offers were lowered to $455/mt.

The July contract of SRW wheat futures on the Chicago Board of Trade -- which settled May 16 up 70 cents/bushel on the day, the maximum gain allowed in a trading session -- eased during Asian trading hours May 17, and was around 18 cents lower at 5:30 pm Singapore time (0930 GMT).

Watching India's move

Market players were weighing the impact of the Indian ban on wheat markets, and opinions on the outlook were wide ranging, a survey conducted by S&P Global Commodity Insights showed.

Contracts that have letters of credit issued on or before May 13 are permitted for exports, under the notification.

Several wheat originators in India are mounting appeals for exports to resume and to gain clarity on the ban, a source familiar with the situation said.

A host of trading companies had a meeting with trade ministry Piyush Goyal May 17 appealing for relaxations for shipments already contracted, another source said. After the meeting, the Indian government modified some rules to allow shipments that had reached customs department for inspection and examination on or before May 13.

However, trade participants estimated around 1.7 million-1.8 million mt wheat remains stuck at different ports.

"Wheat is stuck at storage facilities in ports and on trucks ... wheat is also lying in the open in port complexes as it's expensive to rent storage spaces and transport," a Mumbai-based trader said.

If wheat is kept lying in the open, it may eventually lead to a drop in weightage of the grain, a trader said.

Market players estimate shipments of around 4.5 million mt of wheat have been contracted, according to a survey conducted by S&P Global.