March 18, 2009

India may subsidise wheat exports to reduce stockpiles that are filling up government warehouses to the brim, and the move may pressurise global prices, according to the US Wheat Associates.

India plans to continue its wheat buying programme but granaries are running out of space. State reserves may reach 30 million tonnes by June 1, 40 percent of demand, the US Foreign Agricultural Service said in January.

Indian exports may worsen a 52-percent drop in prices in the past year on the CBOT, and pose strong competition to US suppliers.

US wheat exports fell 20 percent to 20.5 million tonnes in the June 1 to February 26 period on declining feed demand from livestock producers, the USDA said.

India's wheat output may total 77.8 million tonnes in the year ending June, and the government plans to buy 24 million tonnes starting June 1, up from 22.68 million tonnes a year ago. Farmers will be paid a record Rs10,800 (US$210) per tonne.

A group of ministers approved exports of two million tonnes to deplete inventories, ending a three-year ban on overseas sales of the grain, CNBC-TV18 channel reported on March 5.

US supplies will increase and Pakistan may resume imports later this year to fill a shortfall in domestic supplies, said Mark Samson, vice president for South Asia at the US Wheat Associates.