India is likely to soon permit more wheat exports as the world's second-biggest producer of the grain looks set to harvest a record crop this year, government sources said, swelling stockpiles in an oversupplied world market.
The South Asian nation is extremely cautious about allowing exports of wheat, a staple for its 1.2 billion population, and lifted a four-year-old ban on shipments in 2011 by allowing only private traders to sell on the world market.
But a succession of bumper crops and poor storage conditions that have led to substantial wastage have prompted a rethink on exports. Since last fiscal year India has exported nearly 4.5 million tonnes of wheat from state warehouses, and state-backed traders are now selling another 2 million tonnes via tenders.
Any extra supplies from India, though, could dampen Chicago prices which have fallen around 9 percent in the past month due to rising global supplies. Leading producer Ukraine has already raised its 2013 grains output forecast to a record.
"In all likelihood, the crop is going to be an all-time high so more exports are almost certain now," said an Indian government source directly involved in the decision-making process. "But we are yet to take a call on the quantity to be shipped out."
Of the 2 million tonnes of wheat currently allowed for exports from government warehouses, state-run traders have already sold almost a million tonnes.
Three government-backed traders - State Trading Corp. , MMTC Ltd and PEC - are getting good response in their tenders after the government in October cut the floor price for exports to $260 a tonne to boost shipments.
Any decision on additional exports could come in March.
"Most likely a formal decision for more exports will come when another one million tonnes will be sold out. By then, we will also get a clear idea about the crop size," said another government source who is also a decision-making authority.
Indian farmers grow only one wheat crop in a year, with planting in October-September and harvests from March.
Bumper Harvests
This spring farmers would harvest more than 100 million tonnes, Farm Minister Sharad Pawar said on Wednesday, the seventh consecutive wheat crop to exceed demand. In 2013, India produced 94.88 million tonnes.
A jump in the area planted with wheat and favourable weather conditions are the main reasons behind expectations of a record crop in the country which needs 76-77 million tonnes of wheat a year to feed its population.
Farmers have planted wheat on a record 31.14 million hectares, up from 29.65 million hectares in the previous year, said Indu Sharma, chief of the state-run Directorate of Wheat Research in Haryana, a major wheat growing state.
"Crop condition is excellent. Colour is good. There are signs that the crop will be more than 100 million tonnes," Sharma said.
The Indian government buys grains from local farmers at fixed prices to protect them from any distress sale and build stockpiles to sell subsidised food to the poor. Bumper harvests mean more stocks at government warehouses.
On Jan. 1, wheat stocks at state-run warehouses were 28.0 million tonnes, substantially higher than a target of 8.2 million tonnes.
