INDORE/SARANGPUR, (India): For the first season in over a decade, Indian farmer Rajensingh Pawar is selling his new wheat crop to private traders instead of the state stockpiler, as a global wheat price rally gives India’s suppliers a rare profitable export window.
Strong demand following Russia’s invasion of Ukraine means growers are receiving the highest prices ever for their crops, while also easing pressure on the state’s grain procurement agency which racks up huge debts as a buyer of last resort.
The boom times have come as Pawar and his peers harvest a record Indian wheat crop, giving growers a rare opportunity to sell the grain just as global prices hold near all-time highs. “After a long time, traders are ready to pay more than the MSP,” Pawar, 55, said, referring to the minimum support price at which the Food Corporation of India (FCI) buys grain from farmers.
“India’s rising wheat exports have helped farmers like us who are getting a far better return,” he said, as he unloaded wheat at a grain market in Madhya Pradesh state, known for its top-quality wheat.
Before the nearly 50% surge in global wheat prices, India struggled to export the grain due to annual increases in the MSP to placate the politically powerful farm lobby that made Indian wheat more expensive than world prices. But a rare confluence of high international prices, consecutive record crops, a weaker rupee against the dollar and improved internal logistics have made shipments from India attractive.
“This is a golden opportunity for India to export its surpluses,” said Nitin Gupta, a vice president at food and agri-business Olam Agro India.
SALES AND SAVINGS
For international wheat markets, India’s sales are helping offset a supply shortfall resulting from Ukraine-driven disruptions in the Black Sea region, crop cuts in Canada and quality downgrades in Australia. For Indian authorities, brisk demand from private grain handlers at prices above the MSP of 20,150 rupees ($262.88) a tonne means FCI’s wheat purchases are expected to fall drastically for the first time in decades.
Lower state purchases in turn mean big budget savings. Last year, India spent 856 billion rupees ($11.2 billion) buying a record 43.34 million tonnes of wheat from farmers, filling state granaries to the brim and boosting national debt.
This year’s FCI purchases could fall below 30 million tonnes, trade and government officials said, meaning less government capital will be tied up buying and storing crops. Indian traders have signed wheat export deals at between $330 and $335 a tonne free on board, said Rajesh Paharia Jain, a New Delhi-based trader. This is nearly $50 a tonne cheaper than rival suppliers as the rally in global prices and large surplus stocks at home have made it easier for Indian suppliers to offer a discount, but still well above local prices.
Following a flurry of export deals signed in February and March, India’s wheat shipments touched a record 7.85 million tonnes in the fiscal year to March - up 275% from the previous year. Exports could jump to 12 million tonnes in the 2022-23 fiscal year, traders said, making it a serious player in global markets.
QUALITY COUNTS
India’s exports have also been helped by a sharp jump in crop quality. Previously limited to cost-sensitive markets that accepted lower quality product, exporters have recently made sales to some of the world’s most discerning wheat consumers. For the first time, top global wheat importer Egypt has purchased the grain from India, which sources say has helped India establish a reputation as a top tier supplier.
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