May 11, 2011

 

Indian wheat supplies boom

 

 

India's rice and wheat supplies reached 59.1 million tonnes on May 1, approximately four times more than the target it expected.

 

This can probably give a government coping with high food prices some room to permit exports.

 

Wheat stocks at 31.4 million tonnes are well in excess of target of four million tonnes, the result of bumper harvests in recent years and export curbs.

 

Encouraged by overflowing grain bins, India's farm ministry has been advocating lifting a four-year-old ban on wheat exports, although worries about food inflation could scupper this.

 

A decision on exports has also been delayed while the government finalises how much grain it would need for a proposed law that promises more cheap food to the poor.

 

"There are massive stocks, no doubt. Current stock levels will give a cushion to the government if it decides to permit exports in May," a researcher said.

 

India is the world's second-biggest producer of wheat after China. With annual domestic demand of about 76 million tonnes, it also ranks second in consumption to China where demand is over 100 million tonnes.

 

The government, which buys grains from local farmers to build reserves for emergencies and to run various welfare programmes, will get a clear idea about its new season inventory in May when it finishes purchasing wheat from growers.

 

Another analyst said India would allow wheat exports in tranches.

 

"To begin with, the government may allow shipments in small lots of say a few hundred thousand tonnes, totalling 2-3 million tonnes," the second researcher said.

 

Any supply from India, close on the heels of exports from Pakistan, will put pressure on benchmark Chicago prices <Wc1>, which are slightly lower this year.

 

Other than Pakistan, India will also face competition from Australia, the world's fourth-biggest wheat exporter.

 

Australian wheat sales have slowed in the past few weeks as a strengthening domestic currency has lifted prices for overseas buyers, while Pakistan has dumped some 1.5 million tonnes into the global market since it resumed overseas sales.

 

"Competition will be there and, therefore, it makes sense for India to quickly allow exports. After September, there will be pressure on prices due to the arrival of Black Sea wheat," the first researcher said.