May 6, 2011

 

India may take conservative view on opening wheat exports

 

 

India, the world's second biggest wheat producer, is likely to take a conservative approach on allowing wheat exports out of the country, given continued concerns on high food prices, the USDA said.

 

India has banned exports of wheat since 2007. However, the prospects of a record wheat harvest at 84.2 million tonnes in the 2011-12 crop year (July-June) has prompted speculation that the government may allow exports, it said.

 

Pegging India's wheat export at two million tonnes for this year, the USDA said that, "A record wheat harvest, abundant government stocks, and favourable international prices may put India back into the wheat export market after a hiatus of four years".

 

But the government is likely to take a conservative approach on permitting wheat exports due to concerns of food inflation, which was 9.5% in March, it said. Food Inflation was 8.53% for the week ended April 23.

 

With Indian market prices for wheat ranging between INR11,000-INR14,000 (US$245-US$312) per tonne, the country could emerge as a net wheat exporter in 2011, largely by private trade, due to higher prices in the global market, the USDA report said.

 

At present, the Food Ministry and Agriculture Ministry are holding different views on wheat exports. The former is against lifting the ban on wheat exports while the later is supporting overseas sales to help benefit farmers economically.

 

According to USDA, the Indian government may delay its decision on wheat exports during the procurement period that runs from April through June, it said.

 

"In the event that the government announces an export quota for wheat, it is likely to do so only after ensuring sufficient domestic supplies." the report noted.

 

The USDA further observed that the Indian government's position on wheat exports is further complicated due to the significantly higher food grain requirement for the proposed National Food Security Act.

 

With the government unlikely to take a decision on allowing wheat exports in the immediate future, government wheat stocks could be exposed to the 2011 monsoon rains, raising the prospects of damage to the stocks, it said.

 

Government-held wheat stocks as of April 1 are estimated at 15.4 million tonnes, slightly lower than a year ago but more than double the government's buffer stock requirement for the period.

 

The higher procurement price of INR11,700 (US$260) per tonne may push the government procurement higher than the targeted level to 27 million tonnes.

 

Expected record procurement of the 2011-12 harvest will boost government stocks to 37.2 million tonnes on July 1, 2011 against 33.6 million tonnes during the same period a year ago it said.