New Delhi: India’s rice and wheat stocks hit 59.1 million tonnes on 1 May, nearly four times above target and possibly providing a government struggling with high food prices some room to allow exports.
Wheat stocks at 31.4 million tonnes and rice at 27.8 million tonnes are well in excess of targets of 4.0 million and 12.2 million tonnes respectively, the result of bumper harvests in recent years and export curbs.
Encouraged by overflowing grain bins, India’s farm ministry has been advocating lifting a four-year-old ban on wheat exports, although worries about food inflation could scupper this.
A decision on exports has also been delayed while the government finalises how much grain it would need for a proposed law that promises more cheap food to the poor.
“There are massive stocks, no doubt. Current stock levels will give a cushion to the government if it decides to permit exports in May,” said Veeresh Hiremath, research head of Karvy Comtrade, a brokerage based in the western city of Ahmedabad.
India is the world’s second-biggest producer of wheat after China. With annual domestic demand of about 76 million tonnes, it also ranks second in consumption to China -- where demand is over 100 million tonnes.
The government, which buys grains from local farmers to build reserves for emergencies and to run various welfare programmes, will get a clear idea about its new season inventory in May when it finishes purchasing wheat from growers.
Another analyst said India would allow wheat exports in tranches.
“To begin with, the government may allow shipments in small lots of say a few hundred thousand tonnes, totalling 2-3 million tonnes,” said K.N Rahman, deputy research Head at Way2Wealth, a Mumbai-based brokerage.
Any supply from India, close on the heels of exports from Pakistan, will put pressure on benchmark Chicago prices, which are slightly lower this year.
Other than Pakistan, India will also face competition from Australia, the world’s fourth-biggest wheat exporter.
Australian wheat sales have slowed in the past few weeks as a strengthening domestic currency has lifted prices for overseas buyers, while Pakistan has dumped some one-and-a-half million tonnes into the global market since it resumed overseas sales.
“Competition will be there and, therefore, it makes sense for India to quickly allow exports. After September, there will be pressure on prices due to the arrival of Black Sea wheat,” Hiremath said.