India's wheat stocks on April 1, the start of the new harvest, were four times the target, raising prospects of more exportss through diplomatic channels Analysts believe the Indian government, battling high food prices, won't lift a ban on wheat exports but it may ship out small quantities to neighbouring Nepal, Sri Lanka or Bangladesh under government deals.
"As global prices are so weak, lifting a ban on exports without giving a subsidy has no meaning. And a subsidy is out of the question. There could be exports through the diplomatic route," said Rajni Panikkar, head of research at MF Global Commodities.
While Indian wheat prices were higher than international levels, hopes of yet another robust crop was adding to the bearish sentiment in the global market, Panikkar said. On Monday, benchmark May futures in Chicago settled 1-1/4 cents down at $4.53-1/2 per bushel, after dipping to $4.47, a contract low.
Government sources said while wheat stocks were at 16.1 million tonnes against a target of 4 million tonnes on April 1, rice stocks were at 26.7 million tonnes, more than double the targeted 12.2 million tonnes. Stocks are expected to swell further as the harvest has just begun. Wheat is sown in October-Novermber and harvested from April.
After three consecutive bumper harvests in India, the world's second-biggest wheat producer, 2010 output is expected to be a record 82 million tonnes against an annual domestic consumption of around 76 million tonnes, government officials say.
Signalling its confidence about another bumper harvest this year, the government, which banned exports of wheat in early 2007, allowed 50,000 tonnes of overseas sales to Nepal in February. But private exports are unlikely due to high food prices.
The country's food price index rose 16.35 percent in the 12 months to March 20, up from an annual rise of 16.22 percent in the previous week. Higher stocks at government warehouses would force state-run Food Corp of India (FCI), the main grain procurement agency, to go a little slow on purchasing from local farmers. The Indian government buys rice and wheat from domestic farmers to build inventories for emergency needs, run a number of welfare programmes and protect farmers from distress sales.
Industry officials say the FCI would buy about 20 million tonnes of the grain in 2010, down from 25.4 million tonnes a year, said R.K. Garg, president of the Roller Flour Millers' Federation of India. That will encourage the Indian units of trading firms such as Cargill Inc and Louis Dreyfus Commodities to increasingly buy wheat from surplus states and sell it to millers in other parts of the country.