January 25, 2010
India struggles to export wheat products on high prices
India is struggling to export wheat products due to high domestic prices.
In June last year, the federal government removed a two-year-old export ban on wheat products in order to free up space in warehouses for the new crop. However, of the 650,000 tonnes of wheat products allowed to be exported, only about 35,000 tonnes have been dispatched so far to a handful of countries.
High wheat prices in the domestic market have made flour exports unviable, said Veena Sharma, secretary of the Roller Flour Millers Federation of India.
Furthermore, few shipments are likely in the coming months because only limited quantities of wheat are available in the open market as the government has cornered the bulk of the grain from farmers to build federal stocks, she said.
Indian spot wheat prices are ranging between 13,500-15,000 Indian rupees a tonne (US$292-US$325), which is at least INR2,000/tonne (US$43) more than even the landed cost of Ukrainian wheat in the domestic market, she added. CBOT March wheat futures were quoted Friday (Jan 22) at US$4.95 a bushel.
The government uses its wheat inventories for welfare programmes for the poor and to ensure national food security. It had stockpiles of 23.09 million tonnes of wheat as of January 1, much higher than the buffer rule of 8.2 million tonnes.
The reason it had piled up stocks was because it was concerned about damage to summer-sown grain crops, like rice, following a drought in 2009, the worst in 37 years.
However, the government is now in a dilemma as it will be difficult to find adequate storage space for winter-sown wheat once the new wheat crop is ready for harvesting from April onwards.
The government has recently approved the sale of 1.58 million tonnes of wheat from federal reserves to bulk users, like flour millers, in order to ease a shortage in the local market, but industry officials say prices won't come down sharply because of a yawning supply-demand gap.
