Since India is unlikely to resume exports at least until the end of the year, a recent surge in the country's wheat inventories is unlikely to drag down Asian wheat prices, according to trading executives and analysts.

 

India's wheat stocks hit an eight-year high of 35.2 million tonnes at the beginning of this month and speculation is rife that this may prompt the government to lift a ban on wheat exports.

 

September wheat futures on the Chicago Board of Trade ended 1 3/4 cents higher Thursday (Jun 24) at US$4.77 1/2 a bushel.

 

"India's wheat inventories are unlikely to affect global prices soon because even if the government allows exports, they won't be possible without subsidies," said a Singapore-based executive at a global trading company.

 

He said the government's wheat procurement price from growers is around US$236/tonne and after bagging, storage and transportation charges are taken into account, the price will be above US$260/tonne. If local port delivery and freight charges to the import destination are included, prices will be even higher.

 

Thursday, Japan-based commodities trading company Marubeni sold a cargo of optional-origin feed wheat to South Korea at US$190/tonne, basis cost and freight for January delivery. In a tender issued by Bangladesh for food wheat this month, the lowest price offered was US$214.90/tonne, C&F.

 

Due to high local wheat prices, many mills in southern India are importing cheaper but good quality grades from Australia. So far, 50,000 tonnes have already been imported in the current financial year that began April 1, and more than 50,000 tonnes is scheduled for July/August shipment.

 

Non-Basmati rice exports are possible without subsidies if the ban is lifted, but for wheat exports to take off, subsidies will be needed, said TPS Narang, a former director of PEC Ltd., a government-run commodities trading company.

 

Earlier last week, the government said it will review the ban on exports of non-Basmati rice sometime during October or November. Traders said it is possible that the ban on wheat exports will also be reviewed around the same time.

 

However, the formulating of a subsidy mechanism and contracting deals could mean that exports will resume only by the end of the year or later.

 

Another major concern is the performance of monsoon rains, which are so far 11% below the long-term average. The government is unlikely to lift the ban on wheat and rice exports if the rainfall situation does not improve. The monsoon season runs from June to September.

 

According to local millers and traders, supplies in the open market are currently tight and actual production in 2010 may turn out to be much lower than the government's initial estimate of around 82 million tonnes.

 

To have more storage space for the next rice crop, which will be harvested in October, the government plans to step up local wheat sales to millers and retail consumers and supply grains in welfare programmes. On average, it also sells around 1.3 million tonnes of wheat to consumer households at subsidised rates each month.