Home >Politics >Policy >Wheat crop in India reaching 100 million tons widens global glut

New Delhi: Wheat production in India, the world’s second-largest grower, will probably climb to a record as all-time high domestic prices boost planting, adding to global grain surpluses.

The harvest may total 100 million metric tons in the marketing year starting on 1April , Agriculture Commissioner J.S. Sandhu said in an interview on Thursday. Output fell 2.5% to 92.5 million tons a year earlier from a record 94.9 million tons in 2011-2012, according to the agriculture ministry.

Crop prices from wheat and corn to canola are slumping as record harvests from the US to Brazil expand global grain inventories.

The Standard & Poor’s GSCI Index of eight crops fell to the lowest level since July 2010 on Wednesday, extending its biggest annual drop since 1981. Record output may force India to accelerate exports from state reserves to make room for the new crop, extending a decline in global food costs tracked by the United Nations.

“Exports from India will pressure global prices, said Vedika Narvekar, chief manager at Mumbai-based Angel Commodities Broking Pvt. Exports will largely depend on the crop in the US and Russia. Domestic prices will be stable.

Wheat futures tumbled 22% in 2013 as world production climbs by 8.4% to a record 711.4 million tons versus consumption of 699.3 million tons, according to the USDA. Futures fell to $5.8675 a bushel yesterday, the cheapest since December 2011, and were at $5.8825 in Chicago on Thursday.

‘Exports difficult’

Prices in India rallied to all-time high on 27 December after the government increased the minimum price for farmers to a record. The February delivery contract fell 1% to 1,640($26.4) per 100 kilograms on the National Commodity & Derivatives Exchange Ltd. in Mumbai on Thursday.

The international market is not very promising at least for next six months, said Abdolreza Abbassian, a senior economist at the UN’s Food & Agriculture Organization. If India’s output increases as it looks now, global prices will fall below local prices, making exports difficult.

Area for wheat in India may reach a record of more than 31 million hectares (76.6 million acres) this year, said Sandhu. Sowing increased by 5.6 percent to 30.2 million hectares as of 3 January compared with 28.6 million hectares a year earlier, according to Agriculture Ministry data. The average yield of wheat in India is about 3.1 tons per hectare and the crop is planted from October and harvested in April and May.

Monsoon, winter

The crop will get the benefit from a normal winter predicted for this year, said K.K. Singh, head of Agromet division at India Meteorological Department. More than average monsoon rains and its late withdrawal provided adequate moisture which is good for the crop.

State stockpiles of wheat totalled 31.1 million tons on 1 December compared with 37.7 million tons a year earlier, according to the Food Corp. of India. The government raised the minimum price paid to growers to an all-time high of 1,400 per 100 kilograms for the 2013-2014 crop. The government purchases rice, wheat and oilseeds from farmers at guaranteed prices and sell them to the poor at subsidized rates through state-run shops to prevent distress sales in the open market.

Wheat shipments from India may drop by 5% to 6.5 million tons in 2013-2014, according to the USDA. Exports totalled 2.8 million tons between 1 April and 13 December, food ministry estimates. BLOOMBERG

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout