Smallest Indian wheat crop in six years set to spur more imports2 min read . Updated: 10 Feb 2016, 09:39 AM IST
Wheat production is set to decline 5% to 84.5 million tonnes in the year through June from a year earlier
New Delhi: India may harvest its smallest wheat crop in six years after two successive years of below-average monsoon rainfall stresses crops, potentially opening its doors to more imports.
Production is set to decline 5% to 84.5 million tonnes in the year through June from a year earlier, according to the median of estimates from seven analysts, traders and flour millers compiled by Bloomberg. That’s the lowest since the 80.8 million tonnes in 2009-10, farm ministry data show. The government’s target is set at 94.8 million tonnes.
The prospects of a smaller crop and dwindling state stockpiles are already prompting calls from flour mills to scrap the tax on imports to avoid a surge in domestic prices. That may help boost futures in Chicago, which capped the third straight annual decline in 2015, the longest streak since 1999, amid rising global inventories.
“The overall demand and supply situation is getting tight and that will lead to imports of all kinds of wheat not only for blending," said Prerana Desai, vice president for research at Edelweiss Integrated Commodity Management Ltd in Mumbai. “Though the weather improved in the last two weeks, the fact that most of the time the temperatures were high could result in early maturing of the crop, and that in turn will reduce the yields."
Indian farmers faced an almost dry winter after the first back-to-back shortfall in June-September monsoon rain in three decades, which cut output of rice, corn, cotton and sugar cane. The area under wheat fell to 29.3 million hectares (72.4 million acres) as of 28 January, from 30.6 million hectares a year earlier, the agriculture ministry estimates.
Northwest India received 26% less rain than normal between October and December, while in central parts the deficiency was 63% , according to the India Meteorological Department (IMD). The two regions account for the bulk of the country’s wheat production.
“The weather has not been as cold as it should be which is not good for the crop," said Muni Devi, 61, a second-generation wheat grower in Uttar Pradesh, the nation’s biggest producer. “It’s warm and there was no rainfall when we needed."
A second straight year of decline in output will be the first time in four decades and may spur imports by bread and biscuit makers. Mills in southern parts of the country may import at least 500,000 tonnes in the year beginning April from Australia, about the same as last year, for blending with local wheat, said P. Gunasekaran, president of the Tamil Nadu Roller Flour Mills Association.
“It will be rational to lift the import duty on wheat to control prices in the open market," Gunasekaran said. “We are requesting the government to not extend the import duty of 25% on wheat as the crop is going to be lower than last year. Wheat can come provided the duty is abolished."
India first imposed a 10% duty on imports in August and increased it to 25% in October, citing a decline in global prices and adverse impact on domestic growers. Overseas purchases are seen at 500,000 tonnes in 2015-16, compared with 52,000 tonnes a year earlier, according to the US department of agriculture.
Mills in India may find it easy to source wheat from the global market. Farmers across the world will bring in a record 735.4 million tonnes this season, outpacing demand, according to the USDA. The country had 23.8 million tonnes of wheat in state stockpiles at the start of the year, down from 25.1 million a year earlier, government data show. Bloomberg