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Feb 23, 2011 at 09:54pm IST

'Grain exports to benefit from high prices'

New Delhi: Agriculture Minister Sharad Pawar, citing high global prices, called for wheat, rice and sugar exports to resume on Wednesday to take advantage of high global prices for the commodities.

Pawar's call for exports came as at least 100,000 trade unionists marched through the Indian capital on Wednesday in a protest against high food prices and unemployment.

India, the world's 2nd-largest producer of wheat and rice, has kept a tight control over grain exports since 2007, allowing only limited sales through diplomatic deals, while the nation's stocks swelled after three straight years of bumper harvests.

'Grain exports to benefit from high prices'

Pawar's call for exports came as trade unionists marched in New Delhi.

"This is the right time to give serious thought over allowing exports of certain quantities of rice, wheat and sugar as we have ample stocks. World prices are very good while the harvest looks favourable," Sharad Pawar told reporters on Wednesday.

"Exports should be allowed only to the extent where it doesn't hurt domestic consumers."

The demonstration against food prices was the biggest in New Delhi in years and included members of a trade union linked to the ruling Congress party, reflecting disquiet within the party over food inflation, which hit a high above 18 percent last December.

Global concerns over food inflation, with top importers in Africa and the Middle East rushing to cover supplies to head off a repeat of the 2008 food crisis, have sparked riots in countries from Egypt to Haiti.

Benchmark US wheat, corn and soybean prices have climbed to their highest in 2-1/2 year this month to trade near peaks, driven by adverse weather curbing supplies amid strong demand from food and fuel sectors.

India usually produces more of these basic staples than its domestic needs and currently has a huge stockpile of rice and wheat. But a severe drought in 2009 pushed it to the global market for sugar and sent international prices spiralling to three decade highs.

The nation's February 1, 2011 wheat stocks were at 19.4 million tonnes, substantially higher than a target of 8.2 million tonnes, while rice inventory rose to 27.8 million tonnes against a target of 11.8 million tonnes, according to government sources.

"Farmers would like to enjoy higher international prices, especially for sugar and Pakistan has been selling wheat as its taking advantage of the international situation," said Ker Chung Yang, commodities analyst at Singapore-based Phillip Futures.

"India should follow its neighbour. India could easily sell wheat to neighbouring countries especially the ones that have been hit by floods."

Pakistan started exporting wheat in January for the first time in three years, selling cargoes to Bangladesh and Myanmar to takes advantage of rising global prices and surplus stocks at home.

Pawar remains Agriculture Minister but lost the food portfolio in a government reshuffle last month. His opinion still carries weight but decisions on exports are usually made by the cabinet.

Prices key to exports

Indian wheat is priced around $310 a tonne, free on board, compared with Pakistan offering cargoes at around $320 to $330 a tonne, which could boost India's export potential.

Pawar said the country's wheat production is likely to hit a record 84 million tonnes in 2011.

"Indian and Pakistani wheat quality is nearly the same, so if Indian price are competitive, it should be a big advantage for them," said one Singapore-based trader.

Industry officials said Indian wheat could find home not just in neighbouring countries but even across the Middle East and Africa, given the tight global supplies.

"There is appetite for Indian wheat in markets such as the Middle East, Africa and even Southeast Asia. Currently overseas markets look very attractive for Indian wheat," said MK Duttaraj, former president of the Roller Flour Millers' Federation of India.

The coalition government wants to introduce a food security bill aimed at supplying subsidised staple foodstuffs to India's poorest, as spiralling food inflation hits hardest the 42 percent of its population who live on under $1.25 per day.

The government could increase the amount it spends on food subsidies in the next budget, which will be announced on February 28.

Government sources said on Tuesday a decision on whether to allow 500,000 tonnes of unrestricted sugar exports under the Open General Licence (OGL) scheme could take another three weeks as discussions were broadened to key ministries.

The country's sugar production in 2010/11 is likely to rise to 24.5 million tonnes, sharply higher than the previous year's harvest of 18.8 million tonnes.

Uncertainty over India's plan to sell sugar helped global prices stay near their highest level in 30 years as the country is the world's second-largest sugar producer after Brazil, and the world's biggest consumer of the sweetener.

India has flip-flopped on the OGL sales - in December, a minister said mills could export the permitted quantity under the OGL.

But spiralling domestic food inflation put pressure on the government, which referred the issue to a panel of ministers.

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