India has cut the floor price for exports of wheat from government warehouses by 13 percent, a government source said on Wednesday, in a move to boost stalled shipments from the world's second-biggest producer of the grain. Higher supplies from India, struggling with big wheat stocks, could dampen benchmark prices in Chicago which have just bounced off a near one-month low.
With the minimum price at which the government will sell cut to $260 a tonne plus taxes, traders and analysts believe the wheat will be competitive with rival supplies from the Black Sea region that had edged out Indian grain. "It has been decided to reduce the floor export price for wheat to $260 per tonne," a government source told reporters after a cabinet meeting. The government sold nearly 4.5 million tonnes of wheat - about 5 percent of annual output - earlier this year but since then all bids in state tenders have been below the previous $300 per tonne minimum price for government stocks.
India, which lifted a ban on exports in 2011, mainly sells wheat with 11 percent protein content. For buyers in the Middle East, Indian open market wheat costs $305-$310 a tonne C&F, while the same variety from the Black Sea region is available at around $315 a tonne C&F, traders said. "Indian supplies will now be viable in global markets," said Rejoinder Narang, an adviser at New Delhi-based trading company Emmsons International.
India's export volumes are paltry in a global trade of nearly 140 million tonnes, but if global supplies tighten, they will help meet the needs of the biggest buyers of lower-quality wheat in the Middle East and Africa. Guaranteed prices to farmers have ensured consecutive bumper harvests since 2007, pushing up stocks to nearly three times the target level on October 1. Rotting stocks under tarpaulin sheets have triggered criticism of the government.
India buys rice and wheat from local farmers to supply subsidised food to the poor and has recently expanded the food welfare programme to feed 70 percent of the 1.2 billion population. Stocks are likely to surge further as farmers are poised to harvest a bumper winter wheat crop after above average monsoon rains raised soil moisture levels and replenished reservoirs.