May 15, 2012

 

India to attempt wheat exports from federal stocks

 

 

With State Trading Corp. of India inviting bids from prospective buyers, the Indian government has started testing the waters for wheat exports from its bulging stocks.

 

Last week, the state-run trading company sought bids for exports of Indian milling wheat stored in warehouses of the country's national grain procurement agency, the Food Corporation of India, to be shipped from the western ports of Kandla and Mundra.

 

The wheat offered for sale is from the current marketing year that began April 1 as well as from the 2011-12 marketing year. The deadline for submitting bids is May 24, the company said on its website.

 

Buyers have been asked to indicate the maximum quantity they can buy from FCI warehouses per month, free-on-board basis. The minimum quantity to be quoted is a vessel-load of 20,000 tonnes at Kandla port and 30,000 tonnes at Mundra port. Shipments indicated in the bid document are from July-December this year.

 

India is exploring the possibility of exporting as much as 10 million tonnes of wheat from federal stocks to free up storage space before the next crop is harvested, senior government officials told Dow Jones Newswires last week.

 

The country's grain stocks totalled 71.1 million tonnes as of May 1, more than three times its buffer requirement, thanks to record production and higher procurement by government agencies.

 

India, the world's second-largest wheat producer, is expecting a record output of 90.23 million tonnes in the current crop year through June. Good July-September monsoon rains boosted acreage, while plantings also increased after the government raised its purchase price for the procurement of wheat.

 

The government is targeting a 12.6% increase in its wheat procurement stocks to 31.89 million tonnes in the fiscal year that started in April. Although the government is trying to reduce stocks, the FCI has to intervene and procure wheat if prices fall below the minimum support price for farmers.

 

Stocks are expected to rise to 80-85 million tonnes by June 1, whereas the total storage capacity in the country is estimated around 63 million tonnes. Among the potential markets being eyed by India for wheat exports are the Middle East, primarily Iran, which is facing Western sanctions and has lately turned to Australia for securing grain supply. Indian authorities expect Iran to buy up to four million tonnes of wheat if ongoing issues with Karnal Bunt, a fungal disease in wheat that has been found in the country's breadbasket region of Punjab and Haryana, are sorted out
 

The success of India's efforts will hinge on a number of factors such as price parity as well as the final views of a panel set up recently by the prime minister to look into the management of bulging stocks.

 

"After we get the offer prices, we will be able to assess if any incentive is required for exporting wheat," said a food ministry official who didn't want to be identified.