April 21, 2006
India whets its appetite for wheat
India announced tenders to import wheat for the first time in seven years this year and analysts are expecting more to come as production fails to meet rising demand.
People in India are consuming more wheat-based products such as biscuits and noodles as incomes rose over the last six years. The belief that wheat is nutritious is also fuelling demand add to that a population growing by 20 million a year and it is no wonder that the government is finding difficulty keeping up.
Vijay Iyengar, managing director of Agrocorp International expects the country would be a permanent importer of wheat from this year on.
India may need to import millions of tons of wheat in the coming years as consumption is rising, while crop yields are almost stagnant, Iyenga said.
India was brought close to self-sufficiency in the 1960s when new hybrid grain seeds were introduced to boost production. The current shortage of arable land and low fertiliser use are now leading to smaller harvests at a time when wheat-based products have become more popular.
Indian demand would definitely prop up international wheat prices, according to Ravi Chandra, chief consultant at TransGraph Consulting, which advises commodity traders.
Wheat for July delivery rose 1.6 percent to US$3.68 a bushel on the Chicago Board of Trade on Tuesday (Apr 18). Analysts believe there is still room for prices to reach US$4.40.
The annual per capita income in India has risen 62 percent in the past six years to 25,778 rupees (US$902) in the year ended March, prompting speculation that wheat consumption may increase to 74.5 million tonnes by March next year.
ITC Foods, which controls some 8 per cent of India's biscuit market, planned to double purchases of wheat to 1 million tonnes this year to feed rising demand, chief executive officer Ravi Naware said.
Almost 2 million tonnes of biscuits are produced in India each year and consumption is growing at 10 to 12 per cent annually. Naware estimates ITC's sales of wheat products may have risen 40 percent in the year ended March.
Some scientists believe India can do more to increase yields.
The wheat yield per hectare is about 3 tonnes a hectare, compared with about 5 tonnes in the US and China.