The US Department of Agriculture (USDA) has lowered India's wheat output estimate by 3.65% to 79 million tonnes for the current crop year from 82 million tonnes following crop damage due to extreme heat.

 

India, the world's second largest grower, produced a record 80.68 million tonnes of wheat in 2009.

 

Wheat harvesting for the 2010-11 marketing year began on April 1 and will continue till June.

 

“The initial optimism regarding the 2010 wheat crop following favourable growing conditions through mid-March was tempered by a sudden significant rise in temperature, which affected proper grain development, lowering yield prospects,” the USDA said in its latest report.

 

The extreme hot weather at harvest time resulted in lower-than-normal grain moisture levels, further contributing to a potential yield reduction. The fall in production is despite an increase in wheat acreage to 28.7 million hectares, according to the report.

 

The impact of high temperature is likely to be more pronounced in Uttar Pradesh, Bihar, Punjab and Haryana where the crop was planted late. Meanwhile, in Madhya Pradesh, wheat production is expected to touch record levels as the crop was unaffected by the rise in temperature.

 

However, the production gain in Madhya Pradesh is unlikely to offset the likely combined decline in wheat production in Punjab and Haryana, the report said.

 

Due to lower output, wheat procurement is also expected to fall by two to three million tonnes from the record 25.4 million tonnes procured in 2009-10, the USDA said, adding that the government's wheat stock on June 1 could peak to near record level of around 40 million tonnes.

 

Despite the huge stock lying in granaries, India may not lift the ban on wheat exports due to concerns of food inflation. Even if exports were allowed, Indian wheat would remain uncompetitive in the global market without an export subsidy from the government, according to the report.

 

Also, the recent appreciation of Indian rupee against the US dollar would make exports more costly, it added.

 

At the current exchange rate of around INR44.5 for one US dollar, the Free on board (FOB) cost of Indian wheat would be around US$310 per tonne against the US price of less than US$200 per tonne and even lower for Baltic Sea origin wheat, the report said.

 

In early 2007, the government banned exports of wheat to increase the availability of the commodity in the domestic market.