ITC NSE -0.60 % and Cargill have begun cancelling wheat procurement contracts with local traders following the ban on overseas sales of the cereal, putting suppliers in a fix as they don't have holding capacities.
ITC, the country's largest wheat exporter, has invoked force majeure. "The government of India has prohibited exports of wheat with immediate effect... thus resulting in a force majeure event. As a result all our balance contract with you stands cancelled at par with immediate effect," ITC said in an email to suppliers that ET has seen. "The purchase contracts of wheat entered between you and ITC for delivery at port locations were meant for exports from India."
Cargill told wheat suppliers it will accept deliveries that were loaded until May 14. Any wheat loaded after that will not be accepted by the company.
"As the MNCs have started sending order cancellation notifications, it looks like now there are no hopes that the government may allow further relaxations to the May 13 export ban notification," said a Madhya Pradesh-based trader, who didn't want to be identified. "There is no avenue for us to get redress as our case cannot stand in the court of law, where the government is concerned only about farmers and consumers."
'Govt Procurement has Stopped'
India imposed the ban after domestic wheat and flour prices surged and a heatwave was expected to affect crops. "Government had wound up procurement at many places due to poor response from farmers, who were getting good rates in the markets," said Gopaldas Agarwal, a veteran grain trader in Indore.
"Now, since the export ban, the open market and APMC (Agricultural Produce Market Committee) rates in the Indore market have crashed by 12% to 13% as there are no buyers for wheat in the open trade... neither is government procurement taking place. Traders who had sold wheat to big companies have been struggling to unload wheat at the Kandla port."