Indian wheat prices jumped to a record high, despite a ban on exports, amid strong demand and dwindling supply from a crop damaged by heatwave.
The price rally has reduced chances of India supplying substantial amounts of wheat under government-to-government deals with countries struggling to secure shipments amid the disruption of the war in Ukraine.
"Most of the farmers have sold their crop. Negligible supplies are coming up for sale even though demand is robust," said Gopaldas Agarwal, a trader based at Indore in central India.
Local wheat prices jumped to a record 23,547 rupees per tonne on Wednesday. That was up nearly 12% from recent lows that followed the government's surprise ban on exports on May 14.
Supplies in grain markets were much lower this year than normal, showing that 2022 production had dropped far more than the government had estimated, said a Mumbai-based dealer with a global trading firm.
The "government's estimate of 106.41 million tonnes is nowhere close to the reality. Supplies are suggesting production of around 95 million tonnes," he said.
The U.S. Department of Agriculture's Foreign Agricultural Service has pegged production at 99 million tonnes.
India, the world's second-biggest wheat producer, harvested 109.59 million tonnes in 2021. The government estimated less output this year because of a heatwave in March and April.
Lower supplies are also reflected in government wheat procurement, which so far this year is down 57% on the same period of 2021, at 18.8 million tonnes.
The government will have little stockpile to intervene in the market until the new-season supplies become available in March 2023, said a New Delhi based dealer with a global trading firm.
"Supplies are tightening. India may allow exports of (a) small quantity to Sri Lanka or Nepal, but large shipments are unlikely under government-to-government deals," the dealer said.
When New Delhi banned wheat exports, it said it would allow overseas shipments to countries that requested supplies "to meet their food security needs."
India exported 3.5 million tonnes of wheat in the second quarter, mainly to Bangladesh, Nepal, Indonesia, the Philippines and Sri Lanka, up from 1.1 million tonnes a year earlier. (Reporting by Rajendra Jadhav; Editing by Bradley Perrett)