India 2016-17 Wheat Output Likely Up At 88MMT - Attache

MUMBAI (Commoditiescontrol) - India wheat production during 2016-17 is likely to rise a tad at 88 million metric tonnes (MMT) from 86.53 MMT a year ago, according to USDA attache report.

Unlike last few years, wheat was harvested on time in most states due to a shorter winter and early rise in temperature in March/April. Crop yields in the irrigated northern states is reported to be around normal (3-year average excluding last year), higher than last year but lower than the prolonged winter supported record harvest in MY 2014/15. Yields in the partially irrigated states of Uttar Pradesh, Madhya Pradesh, Rajasthan and Bihar are 5-10 percent below normal due to moisture stress conditions during most of the growth stage and rise in the temperature at the time of harvest.

The highlight of attaché report is import projection of wheat during 2016-17, which is likely to record 2 million tonnes on relatively low international wheat prices and the government’s expected lower open market sale intervention due to tight stocks. Market sources report that by the third week of May, local south India based millers have contracted about 450,000-500,000 MT of wheat for imports, mostly quality (high protein) wheat from Australia (price range $237-245/MT CIF) and some lower protein wheat from Europe ($200 to $205/MT CIF) for delivery from July through September. Despite the weak procurement, government is unlikely to import wheat in the upcoming marketing year unless the open market prices increase significantly despite lowering the import duties. However, local millers are likely to continue to import wheat to take advantage of the availability of cheaper wheat in the international market.

After a strong start in April due to timely harvest, government procurement of wheat in the ongoing season has been severely curtailed by the market speculation on upcoming crop size and farmers/traders holding larger than normal what volumes for off season sales compared to previous years. The government’s decision to extend the 25 percent import duty regime and raise the reserve price of wheat under the open market sale scheme for domestic traders and millers to INR 16,400/MT from INR 15,500/MT has also resulted in higher market purchase by private trade and millers/processors.

Consequently, government wheat procurement through May 24, 2016 is estimated at 22.8 MMT, about 15 percent lower than procurement during the corresponding period last year.

Procurement is almost over in the northern states of Punjab and Haryana and is higher than last year suggesting higher crop yields. Government buys almost all of the wheat in these two states at the government procurement price (INR 15,250/MT) or minimum support price (MSP) as higher local taxes precludes wheat purchase by private trade.



Market prices are likely to remain firm during June/July, but the later price movement will largely depend on government’s import policy decisions as the government can lower the import duties from the current 25 percent level to contain any significant increase in wheat prices. Besides, the wheat stocks held by the private trade is also likely to be released upon the arrival of the upcoming kharif crops harvest from September 2016 onwards.

Wheat consumption for 2016-17 is raised higher to 88.6 MMT as consumption is expected to recover to the 2014-15 level on sufficient supplies of quality wheat, both domestic and imported.

Based on the latest official estimates on government held wheat stocks, 2015-16 ending stocks is estimated marginally higher at 14.54 MMT. Wheat ending stocks for 2016-17 is also revised lower to 11 MMT due to the tight government wheat supplies on lower procurement.



(By Commoditiescontrol Bureau; +91-22-40015533)