Indian State Procurement For Wheat Nears 30 Mil Mt Dashing Import Hopes
India, the world’s second single largest wheat producer after China, is unlikely to repeat the large wheat import program seen last year, given its big domestic crop this season, with this week’s state procurement crossing 28 million mt, about 22% higher than last year, industry sources said Thursday.
Wheat purchased by state agencies — including Food Corporation of India or FCI — from farmers as of May 16 for the current wheat marketing season stood at 28.05 million mt, about 22% higher than the same period a year ago, according to data posted by FCI.
The government has targeted to secure 33 million mt for the current marketing season.
Indian wheat production was revised higher to 97.44 million mt as of May 9, from 96.64 million mt previously estimated in February, according to the third advance estimates by the government.
US Department of Agriculture similarly forecast Indian wheat production at 97 million mt in its May 10 report, up 500,000 mt from its estimates in late April.
Favorable weather and timely monsoon rain after two consecutive years of drought was helping the crop yield, sources said.
Moreover, wheat planting acreage were higher, as farmers were incentivized to plant more given a higher minimum support price level.
The government has revised the MSP for 2017 to Rupee 1,625/quintal for wheat in November last year, up Rupee 100/quintal from 2016.
Despite a larger domestic production, India will still need to import 4 million mt of wheat to replenish dwindling domestic stocks which fell to a 10-year low last year, given two years of low production while demand was high amid a growing population.
But with the reinstatement of the wheat import duty which was set at 10% from March 28 to curb imports and protect farmers, import cargoes are no longer seen as attractive.
Traders said interest for wheat imports from Australia was lackluster since the announcement, as prices were not seen as attractive while a strong grain export program in Australia has limited the shipping period sought by importers to the third quarter, whereby buyers are eyeing new crop from the Black Sea region.
This led to some traders being saddled with high volumes of unsold imported wheat mainly from Australia and the Black Sea region, leaving India with high port inventories estimated at about 1.8 million mt a week ago, according to a Singapore-based trader.
“Australian wheat is expensive, and even more so with the 10% import tax, at $220-$225/mt CFR Tuticorin/Mumbai for ASW, and Black Sea new crop at $190-$195/mt CFR,” said one Indian flour miller based in Tamil Nadu state who declined to be named.
About 1.75 million mt of wheat under Australia’s 2016-2017 season (October-September) were sold as of April, including containers, with most of the trades concluded in December-February, traders said.