First rice, now wheat: India rides on global grain trade bandwagon

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After rice, India is set to turn a major exporter of wheat aswell - because of surging international prices from Chinese stockpiling and ultra-low interest funds increasingly finding its way into agri-commodity markets.

The US Section of Agriculture (USDA) on Tuesday upped its forecast of Indian wheat exports for 2020-21 (July-June) to at least one 1.8 million tonnes (mt), as against its earlier estimate of 1 mt. That would be the highest ever in the last six years (check out chart).

The trebling of shipments this season is mainly on the trunk of rising global prices. Wheat future agreements for March delivery at the Chicago Panel of Trade exchange are at $244.35 per tonne, 18.3% greater than the $206.59 this past year. This opens up options for Indian exports to local markets, especially Bangladesh that buys generally from Russia.

With the Russia government levying a 25 euros-per-tonne export tax on wheat effective from February 15 - in response to high domestic rates - Bangladesh “is starting to shift its purchases towards India”, the USDA has noted in its most up-to-date world grain trade report. Bangladesh’s total wheat imports happen to be positioned at 6.6 mt in 2020-21.

Traders, however, believe that Indian wheat is still not competitive in the government’s minimum amount support price (MSP) of Rs 19,750 per tonne. The export cost of wheat bought in Gujarat at that fee - after adding approximately Rs 1,200 towards cost of cleaning, bagging, loading and transfer to Kandla or Mundra port - will be Rs 20,950 per tonne.

That works out to $286 per tonne or $290-as well as, after adding exporter margins.

The above price is greater than the $275-280 that major exporters such as for example Australia, France, US, Russia and Canada are quoting for March-April shipments. Indian grain, in addition, fetches a $10-15/tonne discount in accordance with Australian premium white colored and Russian wheat having more protein content (12.5% versus 11.5%) and less foreign matter/impurities.

“In all, granted our MSP, we are actually $25 roughly per tonne costlier today,” said Amit Takkar, managing director, Conifer Commodities Pvt. Ltd.

That disadvantage can, of program, be overcome if wheat is sourced at below MSP from Uttar Pradesh, Bihar, Gujarat and Maharashtra, where very little federal government procurement happens. The brand new crop arriving in these market segments from March onwards will be available at Rs 17,000-18,000/tonne. This wheat could be exported by rail rakes to Bangladesh or delivered to the Middle East (UAE, Oman and Bahrain) and Southeast Asia (Indonesia, Vietnam and Malaysia).

The USDA report, meanwhile, has also estimated India’s rice imports to have hit an archive 14.4 mt in 2020, up from 9.79 mt and 11.791 mt of the preceding 2 yrs. The country’s closest competition - Thailand and Vietnam - have observed their exports during this time period fall from 11.056 mt to 7.562 mt and 5.5 mt and from 6.59 mt to 6.581 mt and 6.1 mt, respectively. Both have had drought-lowered crops, with Vietnam recently even contracting 70,000 tonnes of Indian rice for the very first time, pursuing China in December.

USDA has projected India’s rice imports in 2021 at 14 mt. Bangladesh, which imported only 80,000 tonnes in 2020, is likely to acquire one mt this year. The beneficiary of it will again end up being India. “Despite considerations about the option of transport containers, which can be impacting rice exports from Vietnam and Thailand, India can export to Bangladesh via rail and vehicle,” the report added.

All of this export demand isn’t undesirable at the same time when India’s own domestic production of rice and wheat touched a great all-time-large of 118.43 mt and 107.59 mt, respectively, in 2019-20. Government organizations also procured a record 52 mt of rice and 38.99 mt of wheat. This year, too, very similar bumper crops tend.

The main element driver of global price turnaround appears to be China. USDA info features forecast record Chinese imports of oilseeds (generally soyabean) and coarse grain (maize and sorghum) in 2020-21 (October-September), aside from end-year shares of rice and wheat. The reason why for its building strategic stockpiles of everything aren’t as completely clear as their influence on international prices.

Source: https://indianexpress.com

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