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India Wheat Export Prices Rise

  • Anjana Pasricha

There could be a huge rise in wheat exports from India, as the country’s output is poised to touch a record high for a seventh year which could help stabilize global prices of wheat.

An unusually cold spell in northern India in December and January has been a boon for wheat shoots, and farmers are expected to harvest another bumper crop in the coming months.

While this is good news for farmers, the ample harvest could create a problem for the government, whose warehouses already are overflowing with stocks from previous years. Wheat stocks in the country are now more than 37 million tons - more than three times the target of 11 million tons.

A commodities analyst, Faiyaz Hudani, at Kotak Commodity Services in Mumbai, says the government will have to cut its massive stockpiles of wheat. “The current crop is very good, the government has to buy this year also, so they have to first liquidate the old stock, so that they can get the space and procure the new crop,” Hudani said.

The government has announced that it will allow 2.5 million tons of wheat to be exported this year - a half-million tons more than last year. But the Food and Agriculture Organization estimates that exports could nearly double to 5 million tons.

Indian wheat is usually sold to buyers in the Middle East and Africa.

India is the world’s second biggest wheat producer. It banned wheat exports in 2007, when world prices spiked sharply. But it allowed exports last year after it had to stockpile wheat in open fields following a several successive years of good harvests.

India is looking at record production at a time when there has been a decline in several other wheat producing countries such as Australia. Russia and Ukraine also could be looking at smaller crops because of drought.

Commodity analysts say India’s re-entry into the export market will help stabilize world wheat prices. Hudani points out that buyers overseas know India has no option but to export its surplus.

“The world knows India has stocks; the world knows that India has a good crop this year, and the world also knows the government does not have space," Hudani explained. "In the current situation we will have to export and we will only be able to export at the current market price.”

The government buys wheat from farmers every year to protect them from market fluctuations and to create a buffer stock for its 1 billion plus population. But it has faced heavy criticism for allowing food grains to rot because of inadequate storage facilities. Food experts often have urged the government to export surplus food grains or use them to feed poor people.
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