India has allowed the export of 2.5 million tons of wheat, which will increase pressure on world markets

India's government on Friday allowed the export of 2.5 million tonnes of wheat, 500,000 tonnes of wheat products and 500,000 tonnes of sugar, Reuters reported. India, the world's second-largest producer of wheat and sugar, is seeking to support local farmers amid protests against a trade deal between New Delhi and Washington.

Thousands of Indian farmers demonstrated on Thursday, saying the government was not taking their interests into account when concluding an interim trade agreement with the United States, although the commerce minister stressed that guarantees had been met.

The government noted in its statement that the decision to export a significant amount of agricultural products is aimed at stabilizing the domestic market and ensuring a financial outcome for farmers after analyzing current supply and price trends.

Last month, the authorities already allowed the export of 500,000 tons of wheat flour and other wheat-processed products.

Traders believe that allowing wheat exports could improve sentiment in the domestic market, but selling the entire allowed volume could be difficult. According to Sumit Gupta, CEO of Gurugram-based Waseda Global, the problem remains high prices for Indian wheat compared to competitors. Indian wheat is offered at around $280/t FOB, while Argentine wheat is around $200/t. Bangladesh buys higher-quality wheat at around $260/t C&F.

India banned wheat exports in 2022 and extended the restrictions after extreme heat reduced the 2023 harvest to 110.6 million tonnes and 2024 to 113.3 million tonnes, leading to depleted stocks and a record rise in domestic prices.

However, weather conditions improved in 2024: more favorable weather, the use of high-yielding and heat-tolerant varieties, and sufficient soil moisture increased the chances of another good harvest. In the 2025/26 MY, India could produce a record 117.9 million tonnes of wheat, while the USDA estimated exports were only forecast at 250,000 tonnes.

Thus, permission to export 2.5 million tons of wheat could sharply increase pressure on world prices in the near future, as other exporting countries will have to lower prices in the fight for buyers.