India allows wheat loading for some pending contracts; Australia wheat FOB prices slip

India's customs authority has permitted four vessels to resume loading the balance of their wheat cargoes in a document dated May 17 seen by S&P Global Commodity Insights.

On May 13, India had banned wheat exports to maintain domestic availability of the food grain and check rising prices.

Prior to the wheat export ban on May 13, around 80,368 mt of the grain had been loaded on these vessels docked at ports according to the note seen by S&P Global. After the permission, these vessels were allowed load the balance of 167,211 mt of wheat.

In total, these four vessels will ship nearly 250,000 mt wheat.

The vessels loading their balance wheat cargoes include MV Xin Yi Hai with a 55,000 mt-cargo destined for Brazil; MV Jag Radha with a 57,000-mt cargo for Bangladesh; MV Valliant Summer with a 66,000-mt cargo loading for Oman and MV Phaedra loading a 70,000-mt cargo for Indonesia.

According to a government official at India's trade ministry, the government allowed vessels for Bangladesh and Oman to resume loading after respective governments requested Indian authorities.

The news did not come as a big surprise, as market participants were expecting it, but added that the ships that have not completed export document formalities before May 13 may risk not getting their wheat supplies.

A source noted that if the Let Export Order is in place, the loadings will carry on provided these documents were issued by the customs department before May 13. A Let Export Order is the final export legal procedure to move goods out of India under Export shipment.

Australian wheat prices soften

Price indications for Australian July-August shipment of Australian Premium White and Australian Standard White varieties of wheat were seen softening.

Platts assessed APW and ASW wheat lower by $13/mt to $460/mt and $428/mt, respectively, on May 19. On May 18, prices had surged to a historical high, supported by the Indian wheat ban as previously reported.

Selling prices for Australian wheat fell after the permission came from Indian authorities to continue wheat loadings in some vessels, said a trader based in Jakarta.

India had emerged as a key supplier of wheat after Russia invaded Ukraine in February and in Asia, Australia had to compete with India over the past few months.

"Since India was offering wheat at cheaper rate than Australia, resumption of supplies from India are seen weighing on Australian wheat prices," a wheat trader based in Perth said.

India's domestic wheat prices drop further

On the other hand, domestic prices of wheat in physical wholesale markets continued to drop, traders said. Prices had started to decline after the ban on exports was imposed.

On May 19, in Indore, a major physical market, wheat prices were at Rupees 2,050 ($26.4/100 kg) per 100 kg, down nearly Rupees 600/100 kg since May 13 when prices were at Rupees 2,600/100 kg.

Current wheat prices in physical markets are now dropping close to the minimum support price, or MSP of Rupees 2,015/100 kg provided by the government at its purchases.

Indian government purchases food grains, such as rice and wheat, from farmers at MSP to run social welfare schemes and maintain a buffer stock to tackle sudden price rises in retail markets.

The Indian government may also try to ramp up its wheat purchases at minimum support price before deadline of May 31 to procure the food grain. This year, government purchases have suffered heavily, due to attractive prices from private traders amid firm export demand and an anticipated decline in wheat output.

According to Food Corporation of India data, till May 14 the government procured 18 million mt of wheat in the ongoing marketing year 2022-23 (April-March), much less than 36.7 million mt recorded a year-ago.

Despite wholesale prices declining across major markets, Indian exporters are not expecting a major shift to the wheat export ban anytime soon.

"The government may give sometime for retail prices to decline before changing the policy completely as prices of flour and wheat products are still very high," a Mumbai-based exporter said.