June 20, 2013
As private traders shun more expensive direct sales, India could add another two million tonnes of wheat for export in a successful tender scheme, bringing the total offered to 6.5 million tonnes.
The decision, which could dampen global prices further and help the world's second-biggest wheat producer cut swollen stocks, may come at a cabinet meeting on Friday (Jun 14), Food Minister K.V. Thomas said.
India's wheat stocks, built up to back welfare programmes to give cheap food to the poor, hit 44 million tonnes on June 1, about a quarter of global totals. As the monsoon starts, these are more at risk to rain as well as rodent damage.
"We had allowed exports of 4.5 million tonnes and almost the entire quantity has been shipped out, and now we are considering allowing another two million tonnes with same floor price of US$300 per tonne," Thomas said.
Three state-owned companies - PEC, State Trading Corp. and MMTC Ltd - have sold the grain via tenders, with the last round offering a total 290,000 tonnes this week. They would also sell the extra two million tonnes.
India has offered another five million tonnes of wheat direct to private traders but no deals have been done here because the floor price is considered unattractive, given the extra transportation costs.
There are also quality constraints as India's wheat is used to make flat breads, unlike the high-protein US soft white wheat which Japan and South Korea prefer. Most of India's wheat goes to Middle East and African buyers.
Extra supplies could nevertheless dampen global prices further. The benchmark Chicago Board of Trade (CBOT) price continues to trade not far from 2013 lows even though worries that wet weather would delay the US winter harvest have edged levels higher this week. CBOT July wheat rose 0.66% to US$6.85 a bushel by 0324 GMT, having closed little changed in the previous session.
The cabinet will also consider selling 10 million tonnes of wheat to domestic bulk buyers and to states for distribution to the poor, Thomas said. This would be priced at INR15,000 (US$251) per tonne, down from US$300 for a previous sale of 6.5 million tonnes.
But Thomas dashed any hopes the export floor would be lowered. "We have been successful in exporting about 4.5 million tonnes of wheat despite the fact that our wheat is slightly expensive. This shows that our wheat is gradually gaining acceptance globally," Thomas said. "We have been able to convince foreign buyers that our wheat is fit for human consumption," he added.