NEW DELHI (Commoditiescontrol) – Recent reports of wheat import contracts might send the government committed to achieve the goal of doubling farmer’s income by 2022 into a tizzy as questions are being raised over the number of higher wheat production estimates. The industry estimates have been claiming lower output and demanding for withdrawal of import duty on wheat at 25% expiring on June 30, 2016.
Ironically, wheat fetched higher market rates than Minimum Sport Prices (MSP) fixed by the government that is reason; government procurement is far behind the target. The centre has fixed MSP of wheat at Rs. 1,525/100kg for this session and Food corporation of India (FCI) and state agencies have procured only 228 lakh tonnes of wheat in the current rabi marketing season(RMS) 2016-17 against 264.46 lakh tonnes procured in the corresponding period last year while Union Food Ministry has set a target for wheat procurement over 300 lakh tonnes for current RMS as 280 lakh tonnes of wheat was procured last year (RMS-2015-16) for central pool.
Prices of mill quality wheat rose Rs. 250 or 18.5 percent to Rs. 1,600/100kg in the major market of Rajasthan during the current marketing season, according to trading sources. Similarly, mill quality wheat traded at Rs. 1,450/100kg at early days to the season in Bhopal in Madhya Pradesh, but it has shoot up Rs. 200 to trade at Rs. 1,650/100kg, as per our reports.
In the third advance production estimates, Union Agriculture Ministry has projected wheat out at 940 lakh in the crop year 2015-16 (July-June) against 865.30 lakh tonnes in 2014-15, the figure was revised by the government in Feb 2016 from 957.60 lakh tonnes estimated previously as untimely rains and hailstorm caused a heavy loss to rabi crops last year.
Again, wheat traders as well as flour millers are waiting for a revision in figure of wheat production estimates of the government this year too. As per the traders’ estimates, wheat production would be around 860-870 lakh tonnes this year. After untimely rain and hailstorm occurred in March, the industry body, ASSOCHAM had predicted a shortfall in wheat production by 130 lakh tonnes from the government’s projection of 938.2 lakh tonnes, according to second advance estimate.
Amid anticipation of low production, local flour millers and traders carried out firm buying in Rajasthan and Madhya Pradesh, key wheat growing and trading centres from initial stage of arrivals, which led a consistent uptrend in prices.
Since, wheat prices are comparatively down in the international market due to higher production and ending stocks, Indian flour millers are focusing on import but with an import duty of 25%, it becomes costlier, said a Bhopal based trader who deals in international trade. Wheat costs nearly 243-145 dollar a tone to import from Australia. It comes around Rs. 1,629-1,642/100kg and including import duty and inland expenses of transportation from port, it costs above Rs. 2,100/100kg, hence, there is no meaning of any import deals at this point unless or until import duty is not removed, he added.
However, some of the traders revealed that multinational trading companies have signed for bulk imports with Australia and France at the rates of 237-243 dollar a tone and 200-205 dollar a tonne respectively.
BK Bansal, President Roller Flour Millers Federation of India, said that some flour mills located in port town of south India had imported wheat from Australia only for blending purposes, as Australian wheat has high protein content. But quantity of wheat import would around 40,000-50,000 tonnes only, he added.
According to him, traders or dealers may have signed the contracts but as far as flour millers are concerned so far no fresh contract of wheat is reported.
“We have been urging the central government to remove import duty on wheat as there is shortfall of production this year,” said Bansal. “If import duty is withdrawn, inflow of wheat from overseas market will increase,” he further added.
“As far as bulk wheat import deals are concerned, talks are going on but traders as well as millers are waiting for government policy on wheat import as production is short, said Veena Sharma, Secretary, Roller Flour Millers Federation of India. She guessed, hardly one lakh tonnes of wheat import deals would have been signed so far but it is expected that 2.5 lakh tonnes of wheat may come in the domestic market from overseas till September.
Media reports appeared in recent fast that Indian flour mills have signed deals to import about five tonnes of wheat from Australia and France for shipment between July and September. India imported a decent quantity of wheat nearly five lakh tonnes last year 2015-16 due to lower crop in the country as untimely rainfall during harvesting season damaged the quality of the crop which gave reason to the domestic millers to carry out buying in overseas market.
To check wheat import, the government had to impose 10 percent import duty on wheat in August 2015 for the first time since 2006. This was revised on October 19,2015 and import duty on wheat was raised to 25 percent to restrict overseas buying in the wake of falling wheat prices in the international market and motivate domestic buyers to source their requirement from Food Corporation of India (FCI).
Again, the Central Board of Excise and Customs (CBEC) in a notification dated March 28, extended 25 percent import duty on wheat from March 31 to June 30, 2016.
Meanwhile, Union Agriculture and Farmers Welfare Minister, Shri Radha Mohan Singh has said that the country will have record production of food grains during 2016-17 as a good monsoon is expected in coming months. The target of food grains production has been set at 270.10 million tonnes for the year 2016-17 of which wheat production target is at 96.50 million tonnes.
Back-to-back drought for two years is probably the reason of shortfall in production of wheat as area under wheat was also down by 2.92 percent at 292.51 lakh hectares in rabi sowing season 2015-16 against 305.94 lakh hectares last year. Wheat output was short last as untimely rain and hailstorm had caused heavy losses to the standing crop. Though, such damage was not reported this year but low acreage could be one of the reasons of short crop-size.
Hence, production estimate of is possibly to be revised later in fourth but government can think on the other aspects before removing import duty on wheat, said a market analyst.
According to him, allowing inflow of wheat from overseas market may pound prices in domestic market which will result in low farming area in next rabi season while the government has aimed to increase farm output amid anticipation of improved monsoon this year.
Some of the traders also believe that withdrawal of import duty will impact market prices. “Wheat prices may fall Rs. 100/100kg in case of zero import duty,” said Uttam, a Bundi based trader.
According to him, government may think to withdraw or lower import duty as most of the farmers have already liquidated their stocks.
However, others don’t consider so. “Imported wheat will be used in port town only, said Manoharlal Khandelwal, a trader in Bhopal.
“Production is low, hence, there is least possibility of any bearish trend in wheat this year,” he added.
According to him, FCI procurement is down as market prices of wheat are higher than MSP.
As far as stock of wheat with FCI, it may fall below 300 lakh tonnes on July 1 due to less procurement this year. As on April 1, 2016, wheat stock with FCI was 145.3 lakh tonnes while as on May 25, only 228 lakh tonnes of wheat was procured in the current season while target for procurement is over 300 lakh tonnes. Wheat procurement will close by June 30 but current pace of procurement shows it will be the lowest in past five years as wheat prices have shot higher than MSP.
For year 2016-17, International Grains Council (IGC), in its latest forecast, has estimated 72.23 crore tonnes of wheat output, 51 lakh tonnes higher from early forecast, however, it is down by 2 percent from last year’s production of 73.56 lakh tonnes.
Production of wheat is higher in the countries of European and United States of America this year.
Consumption of wheat has declined globally which resulted in higher inventory and supply as well. The ending stocks of wheat for 2015-16 have escalated to record level, according to USDA reports.
With supplies rising and use declining, global ending stocks are raised 17 lakh tons to 23.93 crore tonnes, which remain a record large. US wheat endings stocks for 2015-16 are projected 100 bushels higher at 97.60 bushels, these would be the largest ending stocks since 1987, said the reports.
India is the world’s second largest wheat producer after China, El Niño weather pattern affected farm output in the country this year, however, , better monsoon is expected this year which may result in higher production in next crop year 2016-17(July-June). India had imported nearly 20 lakh tonnes of wheat in 2007 but import was down in later in this decade due to stockpiles amid improved production. Since, arrivals are getting down in the market traders are seen interested to buy wheat in overseas market, hence, import of wheat may increase to the highest level after 2007.
| Year |
MSP |
Procurement |
Production |
Ending Stock |
Import |
| 2011-12 |
1120 |
283.33 |
868.74 |
371.49 |
0.15 |
| 2012-13 |
1285 |
381.48 |
948.82 |
498.08 |
0.16 |
| 2013-14 |
1350 |
250.92 |
935.06 |
423.97 |
0.25 |
| 2014-15 |
1400 |
280.23 |
958.5 |
298.01 |
0.52 |
| 2015-16 |
1450 |
280.88 |
865.3 |
386.8 |
5 |
| 2016-17* |
1525 |
228 |
940 |
|
0.5 |
MSP In Rs/100Kg| Procurement/Production/Ending Stock In Lakh Tonne| Import In Lakh Tonne
* Marketing Season in Progress and Procurement data till May 25, 2016, Production data recorded in 3rd advance estimates.
(By Commoditiescontrol Bureau; +91-22-40015533)
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