Mumbai: India attracted a lot of flak, of late, from various quarters for contributing to the ongoing global food crisis. The country’s appetite for food has been blamed for the price spurt. Here is an opportunity for India to actually contribute to cooling of world cereal prices.
With production of about 76 million tonnes (mt) and procurement topping an unprecedented 22 mt, India is smugly placed as far as wheat is concerned. Including the opening stock, the Food Corporation of India may currently be holding more than 26 mt of wheat. With such a comfortable inventory, the prospect of import has all but vanished
IGC outlook
The global wheat scenario is one of optimism too. For the year 2008-09, latest estimates suggest wheat production going to a record high. The London-based International Grains Council (IGC) has projected the world production at a new high of 650 mt , from the previous year’s 604 mt.
The US Department of Agriculture earlier this week came up with a bumper crop estimate of 663 mt (611 mt). Australia, European Union, Canada, China, Russia, Ukraine and USA are all set to harvest larger crops.
World wheat consumption is set to grow robustly. IGC sees wheat use expanding by 20 mt to 632 mt. Driven by lower prices, food and feed use is expected to increase. Yet, clearly, world consumption is sure to trail production given the strong output growth. No wonder, the market has already taken cognisance of the ensuing developments and prices have begun to slide.
Weather uncertainties
Despite a large global surplus, wheat prices are most unlikely to crash or even decline to levels seen two years ago. Further, weather uncertainties, especially in origins such as Australia, can change the current rosy picture.
Additionally, the prospect of a large corn (maize) crop in the US is receding because of wet weather in the Midwest. High corn prices are sure to divert a part of consumption demand towards wheat, especially for feed purpose, and to a lesser extent for ethanol.
Although world prices are correcting down, they would still be at a high level. India should take advantage of the global price situation.
There is an opportunity to export at least 2-3 mt of wheat.
The Government has procured wheat at the support price of Rs 10,000 a tonne. After adding local and other levies, wheat at the warehouse costs about Rs 11,000 a tonne. In addition is the cost of carry, which is not less than Rs 2,500 a tonne a year.
With government holding in excess of 25 mt now, the opening stocks for the next season may be conservatively placed at 7-8 mt, the cost of which would be Rs 13,500 a tonne. There is an opportunity to cut at least partially the wasteful food subsidy incurred on storage of excessive quantities of wheat.
The rupee too is favourably placed for exports at over 42.50 to a dollar. So, an export price of anything over $300 a tonne free-on-board should make a lot of sense for the country.
Export of 2-3 mt wheat from India would aid in cutting the subsidy burden besides helping to cool international wheat prices. But timing is the key. Also, the decision to export would require tremendous political will and courage. At the same time, steps to ensure wheat production next year remains at the same level, if not higher, need to be initiated.
Similarly, the complete ban on export of non-basmati rice should be reviewed and lifted, albeit partially. It is rather ironical that the Government talks about record rice production of 94 mt and goes on to impose an export embargo. Export of up to two mt of non-basmati rice in a well-regulated manner would ease global supplies and cool rice prices.
Maize exports
Maize exports from the country are going on. Shipments have exceeded two mt. This has provided the growers with remunerative prices.
The kharif season is upon us; and the primary objective should be to maximise grains output, especially rice and maize. Large production in India and the possibility of exports out of the country would surely help contain global food prices, and counter negative publicity about India’s border control measures.
With production of about 76 million tonnes (mt) and procurement topping an unprecedented 22 mt, India is smugly placed as far as wheat is concerned. Including the opening stock, the Food Corporation of India may currently be holding more than 26 mt of wheat. With such a comfortable inventory, the prospect of import has all but vanished
IGC outlook
The global wheat scenario is one of optimism too. For the year 2008-09, latest estimates suggest wheat production going to a record high. The London-based International Grains Council (IGC) has projected the world production at a new high of 650 mt , from the previous year’s 604 mt.
The US Department of Agriculture earlier this week came up with a bumper crop estimate of 663 mt (611 mt). Australia, European Union, Canada, China, Russia, Ukraine and USA are all set to harvest larger crops.
World wheat consumption is set to grow robustly. IGC sees wheat use expanding by 20 mt to 632 mt. Driven by lower prices, food and feed use is expected to increase. Yet, clearly, world consumption is sure to trail production given the strong output growth. No wonder, the market has already taken cognisance of the ensuing developments and prices have begun to slide.
Weather uncertainties
Despite a large global surplus, wheat prices are most unlikely to crash or even decline to levels seen two years ago. Further, weather uncertainties, especially in origins such as Australia, can change the current rosy picture.
Additionally, the prospect of a large corn (maize) crop in the US is receding because of wet weather in the Midwest. High corn prices are sure to divert a part of consumption demand towards wheat, especially for feed purpose, and to a lesser extent for ethanol.
Although world prices are correcting down, they would still be at a high level. India should take advantage of the global price situation.
There is an opportunity to export at least 2-3 mt of wheat.
The Government has procured wheat at the support price of Rs 10,000 a tonne. After adding local and other levies, wheat at the warehouse costs about Rs 11,000 a tonne. In addition is the cost of carry, which is not less than Rs 2,500 a tonne a year.
With government holding in excess of 25 mt now, the opening stocks for the next season may be conservatively placed at 7-8 mt, the cost of which would be Rs 13,500 a tonne. There is an opportunity to cut at least partially the wasteful food subsidy incurred on storage of excessive quantities of wheat.
The rupee too is favourably placed for exports at over 42.50 to a dollar. So, an export price of anything over $300 a tonne free-on-board should make a lot of sense for the country.
Export of 2-3 mt wheat from India would aid in cutting the subsidy burden besides helping to cool international wheat prices. But timing is the key. Also, the decision to export would require tremendous political will and courage. At the same time, steps to ensure wheat production next year remains at the same level, if not higher, need to be initiated.
Similarly, the complete ban on export of non-basmati rice should be reviewed and lifted, albeit partially. It is rather ironical that the Government talks about record rice production of 94 mt and goes on to impose an export embargo. Export of up to two mt of non-basmati rice in a well-regulated manner would ease global supplies and cool rice prices.
Maize exports
Maize exports from the country are going on. Shipments have exceeded two mt. This has provided the growers with remunerative prices.
The kharif season is upon us; and the primary objective should be to maximise grains output, especially rice and maize. Large production in India and the possibility of exports out of the country would surely help contain global food prices, and counter negative publicity about India’s border control measures.
