India's grain mountain grows despite push for exports

SINGAPORE/NEW DELHI Tue Feb 26, 2013 2:37am IST

A dumper unloads wheat as a crane loads onto a cargo ship at the Mundra port in Gujarat September 24, 2012. REUTERS/Amit Dave/Files

A dumper unloads wheat as a crane loads onto a cargo ship at the Mundra port in Gujarat September 24, 2012.

Credit: Reuters/Amit Dave/Files

Related Topics

Border Security Force (BSF) soldiers ride their camels as they rehearse for the "Beating the Retreat" ceremony in New Delhi January 27, 2015. REUTERS/Ahmad Masood

"Beating The Retreat" Rehearsals

Rehearsals are on for "Beating the Retreat" ceremony which symbolises retreat after a day on the battlefield, and marks the official end of the Republic Day celebrations.  Slideshow 

SINGAPORE/NEW DELHI (Reuters) - India will be unable to consume or export enough wheat and rice to rein in a record stockpile after another bumper harvest, a failure that means crops risk rotting in fields instead of being sold on world markets to cash in on higher prices.

In March, farmers in India will begin to harvest the sixth consecutive wheat crop expected to exceed demand, and when threshing is over in June the government's combined wheat and rice stocks are set to hit 100 million tonnes. That is about a fifth higher than the volume in storage a year ago.

The grain mountain is worth about $30 billion and the nation of 1.2 billion will soon have enough wheat piled up to feed its poor for a year. But in a stark example of the country's corruption-plagued and inefficient food distribution and storage system, much will simply end up rotting in a country with 500 million poor, and despite a need for income from exports to reduce a record current account deficit.

The food ministry is pressing the government to increase exports, but India's creaking transport system means that a large portion of grains will simply not be able to get to ports even with global prices jumping a fifth last year.

The country's grain export facilities are working flat out, but the government will struggle to ship more than 6 million tonnes of wheat in 2013 from its stocks, while sales by private exporters will be capped at around 2 million tonnes.

If exports reach 8 million tonnes in 2013, it would make India one of the world's top 10 exporters. The volume would amount to about a quarter of the 30 million tonnes shipped by top exporter the United States.

Wheat also has to compete with booming rice exports for limited capacity on the railroads and in the ports. Like wheat, the rice crop has been abundant and the nation emerged as the world's biggest rice exporter in 2012.

"Despite our best efforts, we (India) cannot export to an extent where stocks come down to somewhat manageable levels," said Tejinder Narang, adviser at New Delhi-based trading company Emmsons International.

"The government will have to struggle with mammoth stocks. There's no way out."

That means India is unable to capitalise fully on the opportunity to export to international markets, where there is room for more Indian supply to compensate for poor harvests from major producers.

Benchmark Chicago wheat prices jumped 19.2 percent last year as adverse weather conditions reduced harvests from Australia and Russia, the world's second and third largest exporters. Wheat was the best-performing commodity on the Thomson Reuters-Jefferies CRB index in 2012.

Storage space of 47 million tonnes can accommodate less than half of the expected stockpiles, and the rest will sit under tarpaulins in the open.

Wheat consumption and exports from government warehouses will likely account for around 82 million tonnes of India's 92.3 million tonnes of output in 2013. Additional 2 million tonnes of exports by private traders will leave a surplus of around 8 million tonnes.

India produced a record 105.31 million tonnes of rice last year, while domestic consumption stood at around 90 million tonnes.

The government has so far given permission for 4.5 million tonnes of wheat exports from state storage in 2012/2013. It will likely raise that to 6 million tonnes but beyond that the permits may be no more than a paper solution as there is no real capacity to ship more out unless the bureaucrats push for wheat to have priority over rice exports.

A food ministry official, who declined to be identified, said his ministry was pressing the cabinet to allow India to export as much as possible while prices are firm.

Graphic on India's growing wheat & rice stocks: link.reuters.com/kew95t

RISK FROM PESTS

India's grain stockpile has grown rapidly over recent years, thanks to near-perfect weather and the government's commitment to buy the entire quantity of wheat and rice brought to market in a bid to support farmers.

Wheat stocks alone will be about 64 million tonnes in June, 16 times the state target for the time of year, said two government sources responsible for grain purchases and storage who declined to be identified as they are not authorised to speak to the media.

As India gears up to buy a record 44 million tonnes of wheat from the latest harvest, the Food Corporation of India has been building platforms of wood and cement for storage. These are no match for purpose built grains warehouses and silos and leave supplies exposed to rodents and the weather.

In previous years, images of rotting grains in faded bags has stoked stinging criticism of the government which is now under pressure to trim stockpiles.

PORT CONGESTION

"Port congestion is an issue as cargoes have to wait, adding to exporters' costs and delaying deliveries," said Sanjeev Garg, chief executive at agricultural products trading company CommCorp International in New Delhi.

Even though Indian wheat exports account for a small fraction of the global trade of 140 million tonnes, shipments from the South Asian nation have already helped ease tight supply of lower quality grains.

The latest tender for Indian government wheat was awarded at $312 per tonne. Australian supplies, which are higher quality varieties, typically cost $20-40 per tonne more, traders said.

India has little competition right now for its wheat, which is bought by Thailand, South Korea and Taiwan as animal feed while some southeast Asia countries blend it with milling wheat to bring the cost down.

(Additional reporting by Ratnajyoti Dutta in NEW DELHI; Editing by Ed Davies and Simon Webb)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Reuters Showcase

Vodafone Ruling

Vodafone Ruling

Government will not appeal Vodafone tax ruling   Full Article 

Indian Railways

Indian Railways

Private refiners compete with state firm to sell diesel to railways   Full Article 

Ranbaxy Results

Ranbaxy Results

Dec-quarter net loss widens on forex loss  Full Article 

Market Eye

Market Eye

Sensex, Nifty retreat from record highs on profit-taking.  Full Article 

Tech Talk

Tech Talk

Apple takes high road in China smartphone standoff with Xiaomi.  Full Article 

Business Strategy

Business Strategy

Uber scraps commissions for its New Delhi taxis.  Full Article 

Job Cuts

Job Cuts

Sony to cut 1,000 jobs in smartphone business - sources.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage