The Commission for Agricultural Costs and Prices (CACP) has suggested that the government should push aggressively for wheat exports of a record 10 million tonne from its
reserves in the next fiscal before global prices drop on fresh supplies. Time is, however, running out for the government as trade executives expect global prices to ease significantly from July when spring wheat supplies from the US, a key exporter, flood the market. Moreover, the executives remain sceptical about the country's ability to export 10 million tonne in 2013-14, considering dwindling cost-advantage and limited domestic port capacity.
Global wheat production is expected to rise 5.5% in 2013-14 to 690 million tonne compared with a 6% drop in 2012-13, according to the latest estimate of the International Grains Council. Global wheat prices have already started moderating, albeit at a slow pace, responding to the forecast of a better crop next year. After soaring about 32% until November on
smaller harvests in the US, Russia and the Ukraine due to dry spells, wheat prices ended the year with a 26% gain.
India, the worlds second-biggest wheat producer, has allowed wheat exports of 4.5 million tonne from its central reserves since July, of which 1.35 million tonne has been shipped.
A 10-million-tonne export target of wheat can be achieved in the 2013-14 fiscal, if the government acts aggressively and quickly, CACP chairman Ashok Gulati said in the pre-budget proposal document submitted to finance minister P Chiadambaram. Considering an average price of $300 per tonne, the exports can fetch as much as $3 billion of foreign exchange, he said. The move would also help ease space for fresh crops and save inventory costs.
The CACP chief said that the government needs to decide on wheat exports early as global prices may not stay at elevated levels for long.
Our estimate is, between December 2012 and June 2013, Russia and the Ukraine may together export nearly 2 million tonne of wheat compared with 11.6 million tonne a year before. This leaves enough room for Indian supplies if the government acts swiftly, said a senior executive at a global trading firm.
(However) Exporting 10 million tonne from official reserves in 2013-14 is wishful thinking, as our exports hinge on cost competitiveness, which may change dramatically after July, as well as importing nations appetite. Just because we have stocks doesnt mean we can export them whenever we want. Moreover, our port capacity is limited, and even in the best of the years, the country as a whole, including private exports, has not exported even remotely close to such a high figure, said another trade executive.
Some countries may build inventories in 2013-14 after a drop of 23 million tonne in global carryover stocks in 2012-13, but a higher output next year means global prices may not stay at elevated levels, the executive said. The recent 5% hike in the minimum support price of wheat to R1,350 per quintal would further reduce Indias cost advantage. The economic cost of wheat is expected to rise 5% to $351 per tonne after the hike in the MSP compared with the current export price of $310-323 per tonne on a free on board (FOB) basis.
After keeping a ban on wheat exports for four years through September 2011 despite successive years of bumper harvest, the government has been trying to expedite the process of shipments from its reserves since July when it approved supplies of 2 million tonne to ease storage and gain from high prices abroad.
State-run trading agencies, such as STC, MMTC and PEC, have been asked to float bids regularly while the government engages itself with potential buying nations, including Iran, to strike long-term supply deals, as global prices have exceeded the usually more expensive Indian wheat.
In July, the Cabinet Committee On Economic Affairs had approved the minimum export price of $228 per tonne, which entailed an export subsidy to the tune of R1,263 crore, to cut overflowing inventory and accommodate fresh crops. However, it didnt have to offer subsidy as global prices firmed up since June due to rough weather across producing regions.
The government is facing a storage crisis as official stocks of wheat and rice swelled to 68.25 million tonne as of December 1, more than three times the buffer and strategic requirements and vis-a-vis the covered storage capacity of 45 million tonne.
India produced a record 93.90 million tonne of wheat in the crop year through June, leading to an all-time high procurement of around 38 million tonne of the grain and an overflowing inventory.
Highest bid at $318 per tonne in PECs wheat tender
State-run PEC received a highest bid of $318 per tonne from Switzerland-based Glencore for its wheat export tender, trade sources said on Thursday. This is lower than the last known price received by the company. On November 30, PEC floated three global tenders offering a total of 190,000 tonne of milling wheat for shipments by February 10 from government warehouses located on the east coast. The latest tender, which is one of those three, offered 35,000 tonne at Karaikal port on the east coast. State-run trading firms, such as PEC, State Trading Corp and MMTC, have been floating export tenders to ship out wheat from overflowing government warehouses.Reuters