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India Wheat Imports Seen Surging To Decade High On Shortage

Published on Jun 22 2016 2:16 PM in Supply Chain tagged: Wheat / India / grain

India Wheat Imports Seen Surging To Decade High On Shortage

India may import the most wheat in a decade as output declines in the world’s second-biggest producer. Prices in Mumbai fell the most in eight weeks.

Imports may total 5 million metric tons in 2016-17, the most since 2006-07, according to the median estimate of seven traders surveyed by Bloomberg. Production is set to decline 1.8 percent to 85 million metric tons in the year through June from a year earlier, according to the median estimate of nine traders and flour millers compiled by Bloomberg. That’s the lowest since 2009-10 and compares with the government’s estimate of 94.8 million tons.

“One of the most critical issues is what’s the production number going to look like,” Abdolreza Abbassian, senior economist at the United Nations’ Food & Agriculture Organization in Rome, said by phone. “There will be higher imports than a year earlier, but nothing too big because of the large stocks.”

Even as dry weather curbs output for a second year, stockpiles at the start of May were 14 percent bigger than the government’s July 1 target, Food Corp. of India data show. While the country last week decided to extend its 25 percent import duty on wheat, some southern flour mills are already sourcing grain from overseas. Demand for wheat is robust and steadily increasing, according to B.K. Anand, head of grain and oilseeds business with Cargill India Pvt.

Australia, France

Wheat for September delivery on the Chicago Board of Trade was unchanged at $4.875 a bushel on Tuesday. The contract has declined about 10 percent in the past year. Futures on the National Commodity & Derivatives Exchange in Mumbai climbed about 21 percent in the period and dropped as much as 1.6 percent to 1,761 rupees per 100 kilograms on Tuesday, the biggest loss since April 26.

Wheat purchases by the government from farmers dropped 17 percent to 22.93 million tons as of June 17 from a year earlier, according to state-run Food Corp. data. Arrival of wheat in grain markets across the country fell 20 percent to 25.76 million tons as of June 17, from a year earlier, government data show.

Declining supply is prompting flour millers in non wheat-growing states to buy grain from Food Corp. of India and some processors have contracted to import from Australia and France, according to M.K. Dattaraj, managing director of Krishna Flour Mills Bangalore Pvt. As much as 1 million metric tons from the two countries have been contracted for import, Ramesh G. Kotecha, consultant with Star Agriwarehousing and Collateral Management, estimates.


Import Duty

The amount of wheat India buys from overseas will be affected by the country’s import duty. Mills in southern parts of India may buy at least 500,000 tons in the year ending March from Australia and France and, if the government removes the duty, overseas purchases may total as much as 900,000 tons for blending with local wheat, said P. Gunasekaran, president of the Tamil Nadu Roller Flour Mills Association.

India first imposed a 10 percent duty in August and increased it to 25 percent in October, citing a decline in global prices and adverse impact on domestic growers. Overseas purchases are estimated at 2 million tons in 2016-17, up from 471,000 tons a year earlier, according to the U.S. Department of Agriculture.

“It shouldn’t be difficult for India to source wheat,” FAO’s Abbassian said. “India can choose from whoever offers the best price. I don’t think the situation would be that alarming.”

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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