November 6, 2006

 

Indian wheat backlog hinders imports, prices move up

 

 

India's efforts to rein in wheat prices through massive imports appear to be failing with mounds of wheat backing up at the country's overtaxed ports.

 

The country's announcement to buy large quantities of wheat came as a surprise as New Delhi earlier declared there was no need to import.

 

Some 5.5 million tonnes of wheat have been imported since February, in order to feed its population of more than 1 billion people at affordable prices. To make imports easier, the government even allowed private traders to import wheat duty free besides empowering states to tap wheat hoarded by traders and speculators.

 

Despite the government's efforts to raise the support price this week, to push up yields and draw out stocks belonging to farmers, the prices only moved up. Wheat prices in the country reached their highest levels in the last 10 years to Rs 11,050 (US$247) a tonne. Prices could further go up in the coming winter months when consumption peaks.

 

The government has exhausted all options. More imports would only further fuel global and domestic prices, remarked an analyst Shardul Sharma.

 

Choked supply lines and clogged ports with the sudden inflow of imports were adding to government woes, he said.

 

The dramatic transformation of the country's food grains economy in three short years--from a 60-million-tonne inventory in 2003 to a 6-million tonne importer in 2006 should provide an abject lesson for policy makers, reported the "Hindu Business Line's" editorial.

 

Officials reasoned the pile-up at the ports was because of a bunching of shipments and could clear in the next 10 days. The traders though refused to take that.

 

The government's assessment of this year's wheat crop turned out awry with output much lower than even their scaled-down levels of 69 million tonnes from the earlier estimate of 74, said analysts. They added any wheat stocks would have come out with the government putting limits on the stocks that trade could hold and with prices shooting sky high.

 

Chicago wheat prices were flaring and Australia was keen on a much smaller crop, pointed out Sharma.