Export Wheat

India’s wheat export boom is a bonanza to farmers and boon to govt’s budget relief

India's wheat export boom is a bonanza to farmers and boon to govt's budget relief

India’s wheat export boom is a bonanza for farmers and a boon to the budget relief.

Rajensingh Pawar, an Indian farmer, is selling his new wheat crop to private merchants rather than the state stockpiler for the first time in almost a decade, as a worldwide wheat price rally provides India’s suppliers with a rare profitable export window.

Huge demand following Russia’s invasion of Ukraine has resulted in growers obtaining the best prices for their harvests in history, while also relieving strain on the state’s grain procurement agency, which has racked up massive debts as a buyer of last resort.

Also Read – Why is India attempting to increase wheat exports? Is there a wheat surplus in India?.

The good times have arrived as Pawar and his colleagues harvest a record Indian wheat crop, providing growers with a once-in-a-lifetime opportunity to sell the grain at near-all-time high global prices.

‘Traders are willing to pay more than the MSP for the first time in a long time,’ Pawar, 55, added, referring to the minimum support price (MSP) at which the Food Corporation of India (FCI) buys grain from farmers.

As he unloaded wheat at a grain market in Madhya Pradesh, a state noted for its high-quality wheat, he remarked, ‘India’s increased wheat exports have benefitted farmers like us who are getting a lot greater return’.

Prior to the nearly 50% increase in global wheat prices, India had difficulty exporting the grain due to annual increases in the MSP to appease the politically powerful farm lobby, which made Indian wheat more expensive than world prices.

However, shipments from India have become more appealing due to a rare combination of high international pricing, consecutive record crops, a weaker rupee versus the dollar, and improved internal logistics.

‘This is a once-in-a-lifetime chance for India to export its surpluses,’ said Nitin Gupta, vice president of food and agribusiness firm Olam Agro India.

Sales and savings

India’s sales are helping to fill a supply gap in international wheat markets caused by Ukraine-related interruptions in the Black Sea region, crop cuts in Canada, and quality downgrades in Australia.

For the first time in decades, FCI’s wheat purchases are expected to drop dramatically due to strong demand from private grain handlers at prices above the MSP of 20,150 rupees ($262.88) per tonne.

Lower state purchases translate to significant budget savings. Last year, India spent 856 billion rupees ($11.2 billion) to buy a record 43.34 million tonnes of wheat from farmers, stockpiling state granaries and increasing the country’s debt.

According to trade and government authorities, FCI purchases this year may dip below 30 million tonnes, implying that less government capital will be tasked with purchasing and storing crops.

Also Read – Russia-Ukraine conflict: India’s wheat exports expected to exceed 10mt this fiscal year – USDA.

According to Rajesh Paharia Jain, a New Delhi-based merchant, wheat export deals have been negotiated for between $330 and $335 per tonne free on board. This is approximately $50 per tonne less than other suppliers, owing to a rise in global pricing and big surplus supplies at home, making it simpler for Indian suppliers to offer a discount, but it is still much above the local prices.

The quality improvement has been fueled by the widespread use of higher-quality seeds. According to Gyanendra Pratap Singh, chief of the Indian Institute of Wheat and Barley Research, the top 10 wheat seed varieties accounted for more than 70% of the roughly 31.5 million hectares sown with wheat last season.

‘Earlier, India was not recognized for its high-quality wheat, but thanks to new seed varieties, India’s wheat is now as good as any high-quality wheat from other big worldwide suppliers,’ Singh added.

Better seeds, in combination with improved farm practices and increased mechanization, have converted India’s wheat market from primarily low-quality feed types to one abounding in superior grades like Durum, Lokwan, and Sharbati, which are used in pizza, pasta, and luxury bakery items.

‘Newer kinds have helped farmers generate bigger yields with better protein content,’ said Amit Takkar, CEO of Conifer Commodities, a brokerage.

‘Indian wheat with 12 percent to 13 percent protein is rather common these days, and it compares favorably to the 11.5 percent to 12 percent protein in APW (Australia Premium White).’

Sudhanshu Pandey, the top official at the food ministry, praised farmers and scientists for helping India emerge as a new force in wheat markets, saying the government was committed to helping India become a regular exporter of high-quality wheat.

The only stumbling block to that optimistic view, according to traders, could be a decline in crop yields this year due to a sudden rise in temperatures in mid-March.

Also Read | Ukraine-Russia crisis: global wheat prices at a 14-year high, India’s export potential beckon.

The government expects a record 111.32 million tonnes of wheat to be produced this year, but that estimate might be revised if the recent hot period saps supplies still seeping into wholesale grain markets.

Farmers in Madhya Pradesh’s grains market are ecstatic about exports. ‘For us, prompt payments and higher prices for better grades of wheat are a rare occurrence,’ said farmer Narendra Pariyar. ‘For farmers, the wheat export boom has become a gold mine.’