April 15, 2011
 

India wary over wheat exports

Any government having vast grain inventories, experiencing strengthening world prices and prospects of record output would be eager to enter the export markets, but India's policy makers will hesitate before allowing large exports of wheat.

Wheat exports from the second largest producer in the world could partially fill a deficit in the world supplies as a result of a shortfall in output in vital exporters and calm international prices, which have surged nearly 60% since April last year. However, India's federal government is predicted to remain wary and, in the best-case scenario, allow exports of no larger than two to three million tonnes, which is just a small percentage of the country's approximated 2011 output of about 84 million tonnes, because of soaring local food prices and exploding demand.

Farm officials, politicians and even economists have urged the government in recent weeks to remove four-year-old bans on wheat exports, and India has empowered a group of ministers to determine if it should permit exports of wheat this year. "The biggest constraint exports face is the issues around domestic food inflation," said an analyst. "The Indian government might be reluctant to allow widespread exports whilst domestic food prices are still high."

Agflation is a difficult issue for the congress-led coalition government as the food price index rose 9.18% in the year to March 26, although grain prices were not the main driver.

CBOT wheat prices have surged since last June, after a devastating drought in the Black Sea area prompted Russia, typically the third largest wheat exporter in the world, to prohibit grain exports.

Crop-damaging floods in Australia, the fourth ranked supplier in the world, followed just when the crop was almost ready for harvest in December. In more recent weeks, wheat crops in the US, the largest exporter in the world, and China, the largest producer, have been coming under stress.