India’s wheat export ban: India’s wheat export restrictions will be less explosive

India’s wheat export restrictions have made some high-octane headlines and triggered price increases, but the details may prove less explosive.

The country has banned wheat exports, citing food security risks following a record heatwave that reduced production and pushed up prices. India will continue to provide grain to the countries at the request of their government, even if they have been issued immutable bonds for shipments.

Tobin Gory, a strategist at the Commonwealth Bank of Australia, said there were “many devils in the details” of the move. “We suspect that this will create an initial shock in trading but it will take some time to evaluate the market in detail.”

Egypt, one of the world’s top wheat importers, said on Sunday it was exempt from its official procurement ban. It has agreed to buy 500,000 tonnes of wheat from India, which has recently been approved as a source for import.

“This does not mean that the world will completely lose Indian wheat exports, but it will change the flow of trade and possibly reduce India’s exports,” said Dennis Voznesensky, an analyst at Sydney’s Rabobank. Crops from Europe, North America and Russia will soon be available, which will reduce the narrowness of supply in the real market and reduce the pressure of inflation.

The move by India is a big deal that signals a shift in the growing government-to-government model of trade, where food will be used more widely as a political tool, Voznesensky said. “Whenever wheat is the highest bidder, it will go where the government decides to move it,” he said.