India's grain export plans unlikely to affect global prices

India's decision to partially open up exports of wheat and rice is unlikely to weigh on global prices but is indicative of a burgeoning stockpile, which may become difficult to manage, according to trading executives and analysts.

 

India has taken only small and hesitant steps to dispose of a rising surplus, but its wheat cannot be exported without a heavy subsidy, they said.

 

As of April 30, India's government was holding almost 60 million tonnes of grains, including 33.6 million tonnes of wheat and 26.2 million tonnes of rice. The minimum buffer stock requirements for April 1 are 4.0 million tonnes of wheat and 12.2 million tonnes of rice.

 

India has permitted the export of a paltry 400,000 tonnes of wheat to Bangladesh from government stocks through the Food Corp. of India.

 

"We haven't made any new agreement for purchase of wheat and rice from the Indian government. The proposed sales may be aimed at private companies in Bangladesh," said a government official in Dhaka.

 

Bangladesh's government plans to import 750,000 tonnes of wheat and 300,000 tonnes of rice in the financial year starting in July, but larger volumes are also purchased by the private companies, he said.

 

"India's moves indicate that the surplus available with the government is becoming difficult to manage and if the monsoon is normal, stocks will rise further," said TPS Narang, a former director of PEC Ltd., one of the government-run companies permitted to export rice.

 

Rather than restricting shipments to a small volume through state-run trading companies, which lack procurement expertise, the government should instead open up exports to even private participants to avoid the irreparable damage that heat, dust and rain can do to grain lying in the open, he said.

 

"If government is serious to get rid of the surplus, it should fix a quantitative limit on exports, which will ensure food security but also encourage shipments by private companies," Narang said.

 

In the absence of subsidies, India can offer wheat only at prices close to US$300/tonne, if costs of the government's procurement, bagging, storage and transportation are to be taken into account. In a tender to import wheat in Bangladesh this month, the lowest bid was around US$227/tonne.