May 2, 2022


Strong global wheat demand brings export boom for Indian farmers



Soaring wheat prices worldwide has given suppliers and farmers in India a rare profitable export window, with many Indian farmers selling wheat crop to private traders instead of the state stockpiler, Reuters reported.


Strong demand for grains following Russia's invasion of Ukraine has resulted in producers obtaining the best prices for their harvests in history, while also relieving strain on the state's grain procurement agency, which has racked up massive debts as a buyer of last resort.


The good times have arrived as Indian farmers harvest a record wheat crop, providing producers with a once-in-a-lifetime opportunity to sell the grain at near-all-time high worldwide prices.


Rajensingh Pawar, a wheat farmer in India, said traders are willing to pay more than the minimum support price (MSP) at which the Food Corporation of India (FCI) buys grain from farmers.


Prior to the roughly 50% spike in global wheat prices, India had difficulty exporting the crop due to annual hikes in the MSP to appease the politically powerful agricultural lobby, which rendered Indian wheat more costly than international prices.


However, shipments from India have become more appealing due to a rare combination of high international prices, successive record crops, a lower rupee versus the dollar, and improved internal logistics.


Nitin Gupta, a vice president at food and agri-business Olam Agro India, said this is a massive opportunity for the country to ship its surplus wheat.


India's sales are helping to fill a supply gap in international wheat markets caused by Ukraine-related disruptions in the Black Sea area, crop cuts in Canada, and quality downgrades in Australia.


For the first time in decades, FCI's wheat imports are projected to drop dramatically due to strong demand from private grain handlers at rates above the MSP of INR 20,150 (~US$262.88; INR 100 = US$1.31) per tonne.


Lower state purchases translate to significant financial savings. Last year, India spent INR 856 billion (~US$11.2 billion) to buy a record 43.34 million tonnes of wheat from farmers, stockpiling state granaries and increasing the country's debt.


According to trade and government authorities, FCI purchases this year may dip below 30 million tonnes, implying that less government money would be spent on buying and storing crops.


Rajesh Paharia Jain, a New Delhi-based merchant, said wheat export arrangements have been negotiated for between US$330 and US$335 per tonne free on board. This is roughly US$50 per tonne less than competing suppliers, owing to a surge in global prices and massive surplus supplies at home, making it simpler for Indian suppliers to provide a discount, but it is still far more than local rates.


India's wheat shipments reached a record 7.85 million tonnes in the fiscal year to March, increasing 275% from the previous year, thanks to a flurry of export deals struck in February and March.


Traders predict that exports would increase to 12 million tonnes in the fiscal year 2022-23, making it a significant player in global markets.


A dramatic increase in crop quality has also aided India's exports. Exporters have recently made sales to some of the world's most discerning wheat consumers, formerly relegated to cost-sensitive areas that accepted poorer quality product.


For the first time, Egypt, the world's largest wheat importer, has purhased grains from India, bolstering India's position as a top tier supplier.


The quality improvement has been fueled by the widespread use of higher-quality seeds. Gyanendra Pratap Singh, chief of the Indian Institute of Wheat and Barley Research, said the top 10 wheat seed types accounted for more than 70% of the nearly 31.5 million hectares sown with wheat last season.


Amit Takkar, chief of brokerage Conifer Commodities, said newer wheat varieties have helped farmers get higher yields with better protein content, adding that Indian wheat with 12% to 13% protein is common and it compares favourably with APW's (Australia Premium White) 11.5% to 12% protein.


Sudhanshu Pandey, a senior official at the food ministry, praised farmers and scientists for helping India emerge as a new power in wheat markets, saying the government was committed to helping India become a regular exporter of high-quality wheat.


The only stumbling block to this optimistic view, according to traders, might be a decline in crop yields this year due to a sudden spike in temperatures in mid-March.


The government expects a record 111.32 million tonnes of wheat to be produced this year, but that estimate might be revised if the current hot period saps supplies still trickling into wholesale grain markets.


-      Reuters

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