May 25, 2012

India to trim grain stocks; gets wheat export bids

As it received bids for wheat exports and urged states to draw their allocation for subsidised grain sales six months in advance, India took the first steps toward trimming its bulging grain stocks Thursday (May 24).

A tender issued by State Trading Corp. of India (512531.BY) to export wheat from federal stocks attracted bids from six companies including international trading houses Glencore, Toepfer and Cargill Inc., executives at the state-run company said.

The bids ranged from US$150 a tonne to US$230 a tonne, free on board, far below the prevailing international prices of around US$300 a tonne, but the government may just settle for some deals as it doesn't have enough storage space and would be forced to keep about 10 million tonnes grain in the fields. That runs the risk the stocks left in the open could be washed away when monsoon rainfall likely begins by June 1.

"We hear the government may consider giving some kind of an incentive or subsidy for exports from federal stocks. If so, this should be enough to push out the grain," said an STC executive, who didn't want to be named.

The validity of STC's tender is until June 22, but the trading company could decide earlier, said another company executive.

Any decision to offer an incentive or subsidy for wheat exports won't be an easy one to make as opposition politicians can accuse the government of selling the country's wheat cheap rather than supplying to the poor.

However, a steep fall in the Indian rupee's value against the US dollar may make the decision easier as the government would have to offer only a small subsidy because exports from the country have become cheaper.

The government also moved to ease the pressure on federal granaries by asking state governments Thursday to pick up six months in advance the food grain allocated to them to sell through social welfare programmes.

Food Minister K.V. Thomas asked 12 states to quickly lift six million tonnes of grains allocated to them for supplying to families that are slightly better off than the poorest, and another 1.54 million tonnes meant for the country's poorest districts.