India procures record wheat crop

India procures record wheat crop
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First Published: Tue, May 27 2008. 01 09 AM IST
Updated: Tue, May 27 2008. 01 09 AM IST
Hamburg/New Delhi: India is well supplied with wheat and has no immediate need for further imports, which in turn could help weaken global prices, German commodity analysts FO Licht said on Monday.
The country’s wheat harvest this year was expected to rise to 76.7 million tonnes (mt), up from 75.8mt last season.
India has bought 21mt of wheat through various state and Central agencies till Sunday, helped by a record harvest and higher minimum support price (MSP) at which it buys from local farmers. It bought a little more than 10mt of wheat in the same period last year.
The government is now expecting final purchases would total 21.5mt, as it would continue to buy as long as farmers sell the grain and offer wheat at MSP, which was raised to Rs1,000 a quintal (0.1 tonne) this year from Rs750 earlier.
Wheat production is estimated at a record 76.78mt in the 2007-08 season. “This year, we are expecting wheat purchases to reach 215 lakh tonnes,” state-owned Food Corporation of India chairman and managing director Alok Sinha had said last week.
“Higher wheat procurement and an expected bumper crop should lead to a strong growth in government stocks this year,” Licht said in its World Grain Markets Report.
India has substantial state programmes to provide subsidized, low-price flour to the poor. These programmes are undertaken with the help of major state wheat purchasing programmes.
“With carryover stocks of 5.8mt on 1 April 2008, up from 4.6mt at the same date last year and above a targeted 4mt and a government procurement of 21.5mt, total wheat availability from the government will be around 27.3mt,” Licht said. “This is more than adequate to run the subsidized welfare programmes and leaves more than enough wheat to replenish domestic emergency stocks.” Stocks should be enough to avoid another round of heavy imports, it said. “Wheat imports in 2008 should, therefore, not exceed 500,000 tonnes, if, indeed, there should be any at all.”
“India’s reduced need for imports in 2008 will clearly prompt several major exporting countries and traders to re-direct their shipments from the Asian country to other destinations, with Russia, Australia and Canada certainly most affected,” it added.
“This in turn can be expected to have a knock-on effect on international markets and provide some downward pressure on prices,” Licht said.
With Indian stocks good, it was also questionable whether the country will eventually import the wheat it contracted on 6 April, when it acquired the right to buy 180,000 tonnes from trading company Cargill Inc. at $406 (Rs17,296 today) per tonne in a call option tender, Licht said.
A call option gives a buyer the right to purchase a commodity at a specific price within a specific time period.
India has until mid-July to exercise its right to go ahead with the imports. Should it decide to drop the purchase, it would have to forfeit an advance payment of $35 per tonne.
PTI contributed to this story.
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First Published: Tue, May 27 2008. 01 09 AM IST