India will allow exports of common rice beyond an informal cap of two million tonnes as the government looks to trim huge grain stocks to make room for the winter harvest, official sources said on Thursday. The decision is also partly influenced by a sharp drop in food inflation, a weaker rupee and attractive global rice prices, the government sources said.
India said in September it would allow an unspecified amount of wheat and non-basmati rice exports, removing curbs on overseas sales in place since early 2007. But Food Minister K. V. Thomas had said exports would stop at two million tonnes each of wheat and common grades of rice, mindful of food inflation running at a near-double digit clip.
The food price index has now dropped 2.90 percent in the year to December 31, data released on Thursday showed. "There was an informal agreement that exports will be stopped once traders ship out 2 million tonnes, but at the moment we have decided not to stop shipments," said one of the sources, who did not wish to be identified as he is not authorised to talk to reporters.
Exports of Indian non-basmati rice, which is cheaper than that of Vietnam and benchmark Thai prices, have been brisk. Private traders have so far shipped 1.96 million tonnes between September 9, when the export orders were issued, and January 7. India, the world's second-biggest rice producer, is shipping common grades at around $440 a tonne, down from $470 per tonne in September when overseas sales were allowed.
India is exporting rice to South Africa, Nigeria, East Africa and the Middle East and neighbouring Bangladesh. India is sitting on huge stockpiles before an expected bumper harvest, with summer production in the 2011/2012 crop year expected to rise 8 percent to 87.1 million tonnes from last year, farm ministry data showed.
On January 1, India's rice stocks at government warehouses stood at 29.8 million tonnes, above a target of 11.8 million tonnes. "Keeping in mind our huge stocks, we can easily allow some more rice to go," said another government source with direct knowledge of the issue.
Stocks of wheat are also staggering, but exports have been rather staid due to lower global prices. Wheat exports between September 9 and January 7 stood at 423,000 tonnes. On January 1, wheat inventory was at 25.7 million tonnes, more than three times the official target. Benchmark wheat prices in Chicago have fallen more than 24 percent in the past six months. On Wednesday, wheat was almost unchanged at $6.39 a bushel. Reuters analyst Wang Tao said CBOT March wheat faces a resistance at $6.45, a break above which will make a target at $6.52-3/4 available.