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Government to prioritise wheat exports to grapple with grain mountain

Reuters
Mar 06, 2013 at 11:53pm IST

New Delhi: India will do everything it can to push record volumes of wheat onto the global market to cut massive stocks, a senior farm ministry official said on Wednesday, in a move that could hit shipments of other grains using rail and congested ports. The world's No 2 wheat producer is expecting another bumper harvest to start rolling in within weeks but lacks the warehouses needed to weatherproof a grain mountain that is big enough could feed its 500 million poor for a year.

It could decide to allow another five million tonnes of wheat exports as early as Thursday, government sources have said -- more than doubling the sales already approved to about 9.5 million tonnes. The surge of supply on top of better harvests expected from Australia, the United States and the Black Sea, would put further pressure on global prices.

Benchmark Chicago wheat prices fell to an eight-month low last week on a better outlook for the US crop. "Wheat exports are a priority issue as the new harvest is about to begin later in the month," said the farm ministry official, who declined to be named as he was not authorized to speak to the media.

Government to prioritise wheat exports

It could decide to allow another five million tonnes of wheat exports as early as Thursday, government sources said.

Shifting such huge volumes in India -- a third of what top exporter the United States ships in a year -- would put a big strain on limited rail and port capacity and hit private exports. The wheat harvest starts arriving later this month and picks up during April.

By June, total grains stocks will hit a record 100 million tonnes, with only half of that finding room in silos safe from the drenching June to September monsoon rains. "India has a golden opportunity, at least for the next few months," said Sanjeev Garg, chief executive at CommCorp International, a New Delhi-based trading company.

But India's railways are short of freight cars and the government itself says it needs an 80 percent jump in port capacity by 2017 to cope with a trade boom in Asia's third-largest economy. The country's increasingly wealthy 1.2 billion population is clamouring for all kinds of goods not easily available at home, from luxury cars and clothes to better quality cooking oils and lentils.

At the same time, the government wants to boost exports to address a record current account deficit. While prioritising wheat could help shipments of that commodity, other trade could suffer in the country, which became the world's biggest rice exporter in 2012.

"Since India's capacity is limited whichever way they slice it is going to have a knock on effect on something else," said a Singapore-based grains trader. Last year, ships waiting to load Indian corn faced delays of up to two months on the east coast last year as infrastructure bottlenecks and monsoon rains delayed shipments.

"It was horrible at the end of last year when you had ships waiting for two months on the east coast, particularly corn ships," said one Singapore-based trader with a global trading company. "There was virtual gridlock."

Raising the number of ports allowed to handle grains could help in the short-term, industry experts said. "Many small and big ports have been constructed in the last few years but they haven't been notified. So the (Food Corporation of India) can't export grains from these ports," said Anil Devli, chief executive of the Indian National Shipowners Association.

Ports on both sides of the country are currently handling wheat sales, which are going both to the Middle East and to clients in Asia such as Vietnam, South Korea and Thailand who are buying it for animal feed. Oilmeal exports could face a short-term squeeze while in the case of rice, the main casualty will be basmati, as it is mostly exported from the west coast where wheat volumes are higher.

Some relief could from a slump in iron ore exports in the last year after a mining ban in key producing states, although transportation would be more expensive. And red tape may yet stymie the government's export aims.

"It is nearly impossible for the government agencies to export 9.5 million tonnes wheat. Their tendering process is very time consuming. India never exported this much," said a Mumbai-based dealer with a global grains trading firm who declined to be named.

The country has only managed to ship 3 million tonnes almost a year after giving a green light for 4.5 million tonnes.

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