India’s wheat imports may exceed government forecast

India’s wheat imports may exceed government forecast
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First Published: Wed, Apr 04 2007. 07 40 PM IST
Updated: Wed, Apr 04 2007. 07 40 PM IST
By Pratik Parija/Bloomberg
New Delhi: India, the world’s second-biggest wheat grower, may import more grain than the government forecast to meet demand from flour mills and biscuit makers.
Imports may reach 4 million metric tonnes this year, a third more than the 3 million tonnes Agriculture Minister Sharad Pawar has said the government may purchase, according to three traders and seven company officials surveyed by Bloomberg News.
Increased imports by India may strain global stockpiles of the grain forecast to slide to a 25-year low. Wheat demand may reach 75.5 million tonnes, exceeding a government output estimate of 73.7 million tonnes, as the nation’s record economic growth boosts consumption of breakfast cereals, noodles and biscuits.
“It’s very clear that India is going to import wheat because of an increase in consumption,” M.V. Balasubramaniam, managing partner, Narasu’s Roller Flour Mills, said in phone interview from Salem, Tamil Nadu. “The little increase in the forecast does not change the reality.”
Wheat for delivery in May rose 1.5% to $4.2525 a bushel in the after hours electronic trading on the Chicago Board of Trade, ending three days of losses. Prices reached a 10-year high in October partly as India resumed imports in February 2006 after six years.
Global wheat supplies will decline to 121.2 million tonnes at the end of the marketing year on 31 May, the lowest since 1982, the USDA said 9 March. Production will drop to 590.8 million tonnes, 5% less than last year.
Guaranteed prices
India may harvest 73.7 million tonnes of wheat in the year ending June, more than 72.5 million tonnes forecast in February, as good weather and higher prices encouraged farmers to boost planting, farm secretary P.K. Mishra said in New Delhi on 4 April.
The government may buy 15.15 million tonnes from this year’s crop, harvesting for which began last month, compared with 9.23 million tonnes last year, the junior food minister Akilesh Prasad Singh said on 2 March. It has guaranteed farmers Rs850 for 100 kilograms, which is less than the prevailing market price.
“They will not be able to buy as much wheat as they want because the market price is above the government rate,” said K.S. Kamala Kannan, chairman of Naga Ltd, which owns flour mills in the southern Tamil Nadu state. “Imports have become a reality.”
‘Low stocks’
Lower procurement by the government means the state warehouses may hold 3.5 million tonnes of wheat, less than the buffer stock of 4 million tonnes, the Foreign Agricultural Service at the US embassy in New Delhi said in a 21 February report.
“Despite higher wheat production, the overall wheat supply situation and wheat availability, from the government stocks in particular, is likely to remain tight. This is due to low carry over stocks and likely low procurement,” the report said.
India could import 3 million tonnes this year, if required, to augment supplies, Pawar said last week.
“Food habits are changing. Even states that never demanded wheat are now asking for it and are consuming it,” he said.
India’s inflation rate has stayed at near a two-year high of 6.46% in the three weeks ended March 17. The ruling Congress party, which lost two state elections last month, wants to curb inflation before polls this month in the state of Uttar Pradesh, which sends a seventh of all lawmakers to parliament. The polls will set the tone for general elections in two years.
“Although the new crop is better than last year, we do expect India to import this year mainly with a view to check prices domestically,” Vijay Iyengar, managing director of Singapore-based Agrocorp International Pte. said in an e-mail. The government may buy 3 million tonnes and non-state trading company could import about 1 million tonnes, he said.
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First Published: Wed, Apr 04 2007. 07 40 PM IST
More Topics: Money Matters | Commodities |