April 30, 2011

 

Pakistan gains on India's grain trade absence

 

 

India's absence from the global wheat and ordinary-grade rice trade has given Pakistan an edge in stepping up exports of these commodities, benefitting from strong international prices, trade participants said Friday (Apr 29).

 

Pakistan has filled a crucial gap in Asian and African markets for wheat and rice due to the lack of supply from the Black Sea region and India.

 

Even though India is sitting on a huge inventory of grains, it is missing out an opportunity to make its presence felt in the global trade because of its ban on exports of wheat and non-Basmati rice, they said.

 

"Rather than maintain a blanket ban on exports, India needs to impose a quantitative ceiling on shipments," said a Vietnam-based executive with a global grains trading company.

 

A ceiling would enable India to reduce its excess inventories without risking food security, and would also help to check increases in international prices at a time when food inflation has become a global concern, he said.

 

As of April 1, India's government was holding stocks of almost 29 million tonnes of rice and 15.4 million tonnes of wheat, well above buffer and strategic reserves requirements of 14.2 million tonnes of rice and seven million tonnes of wheat.

 

Pakistan has exported its excess stocks of wheat and India should do likewise, said Muhammed Najib Balagamwalla, chairman of the Seatrade Group, a Karachi-based commodities trading company.

 

Pakistan has exported 1.2 million tonnes of its earlier inventories, shipments of another 200,000 tonnes from old stocks are in the pipeline, and it is now striking deals even for the current harvest, he said.

 

Traders in India say that the country's domestic wheat prices in many states are well below the government-set intervention price, and quite competitive in the international market.

 

Wheat in the northern province of Uttar Pradesh has recently traded around INR10,200/tonne (US$230.51), inclusive of taxes, compared with the government-set intervention price of INR11,200/tonne (US$253.11).

 

Ashok Gulati, chairman of India's Commission for Agricultural Costs and Prices, suggests that the country should immediately allow exports of up to 10 million tonnes of wheat and rice, as it would help to improve the prices paid to farmers.

 

Even after accounting for transportation expenses from the inland province of Uttar Pradesh to port and other miscellaneous expenses, India can offer wheat for export at US$275/tonne, free-on-board, making it the cheapest exported wheat in the world.

 

Pakistan is exporting milling wheat around US$300-$310/tonne FOB, while milling wheat grades of Australia and the US are well above US$350/tonne, FOB.

 

In rice markets, many African buyers that have been importing Indian grain have turned to Pakistan and Thailand in the past few years.

 

Despite devastating floods last year, Pakistan has exported almost 2.0 million tonnes of non-Basmati rice during the July-March period.

 

India can export parboiled rice for around US$400/tonne FOB, while Pakistan's latest offers are close to US$470/tonne FOB, and Thai quotes are around US$500/tonne FOB, a New Delhi-based trading executive said.

 

While the government-set intervention price for ordinary-grade unmilled rice is INR10,000/tonne (US$225.99), farmers in many states are selling their produce around INR8,000-INR9,500/tonne (US$180.79-$214.69), traders said.

 

India can also offer 25% broken white rice around US$440/tonne, while the corresponding grade is around US$450/tonne from Vietnam and US$440/tonne from Pakistan. All prices are free-on-board.