March 10, 2011

 

India's exports hopes boosted by bulging grain inventories

 

 

India's bulging grain inventories before end March harvest season are a good reason for lifting export curbs, but analysts say it is not likely to be due to political considerations ahead of state elections in coming months.

 

At 17.2 million tonnes, wheat stocks on March 1 were more than twice the 8.2 million tonnes target, government sources said on Wednesday (Mar 9), while rice stocks rose to 28.75 million tonnes, far over the target of 11.8 million tonnes.

 

The sources stated they believe India, the world's second-largest rice and wheat producer, can now afford to allow grains exports, banned since 2007.

 

India is en route to its second-largest food grains harvest in 2010-11, including a record 81.47 million tonnes wheat, which could help the government control food prices and allow overseas sale of wheat and rice.

 

"Healthy stocks before the start of harvesting season could help lift the export ban on wheat," said Veena Sharma, secretary of the Roller Flour Millers Federation of India.

 

Sharma said the government might relook at its wheat exports ban decision in May, at the end of the harvest season.

 

India's food price index decreased to 10.39% in the year to February 19, having climbed to a year's high of 18.32% in late December, government data showed last Thursday (Mar 3).

 

Analysts, however, said the export restraints are likely to remain unchanged.

 

High food prices pose a political obstacle, drawing flak from voters ahead of state elections in coming months that will help decide the strength of the ruling Congress party-led coalition for the rest of its term.

 

"I do not see an immediate withdrawal of the export ban on wheat despite the record production," said an analyst.

 

He also said the government would be highly interested to see how procurement of the grain shapes up when harvesting begins later this month.

 

State-run Food Corp of India, the main grain purchasing agency, buys wheat from domestic farmers between March and May, while it procures over the course of the year starting from October.

 

The government purchases rice and wheat from farmers to build safety stocks for emergencies, run various welfare programmes and protect farmers from distress sale.