India 2021-22 wheat procurement spikes, may limit exports
New Delhi — The Food Corporation of India has purchased 20.0 million mt of wheat from farmers so far in the 2021-22 marketing season that began April 1, a more than fourfold increase from the same period last year and a figure likely to limit India’s exportable supplies, according to sources.
India is the world’s second-largest wheat producer, and after several years is in a position to export significant quantities at a time when global inventories are at two-year lows.
In 2020-21, India exported 1.7 million mt of wheat, from just 211,094 mt the previous year, data from India’s Agricultural & Food Processed Export Development Authority showed. However, the sharp spike in wheat procurement by the government is expected to increase the export price of wheat in the global market and limit the availability of the grain.
The Indian government procures food grains, particularly wheat and rice, to support farmers and provide grains at subsidized prices under different social security programs.
The FCI is the government’s agency for procurement, disbursal and maintaining government inventories of food grains.
In April 2020 the government bought 4.8 million mt wheat from growers. The government is currently purchasing wheat at the mandated minimum support price of Rupees 19,750/mt ($261.50/mt).
The wheat marketing season runs from April to March. In the 2021-22 marketing year, the central government has estimated overall wheat purchases at 42.7 million mt. The estimate for the overall procurement is around 10% higher than last year’s actual purchases of 39.0 million mt, FCI data showed.
Exports seen limited
Some market participants expect total wheat purchases to top government’s expectations as localized restrictions are making it difficult for farmers to sell to private traders.
“In some states lockdowns have been imposed, which makes it difficult for traders to make bulk deals. In these conditions, farmers tend to offload more of their grain to the government,” Jaipur-based trader Aniket Mehta said.
Delhi-based exporter Anand Goyal said: “If the government procures wheat in huge quantities, it will tighten supply in the open market and lead to a rise in domestic prices.”
“If the price for the commodity increases in the domestic market, export prices will also rise and will eventually limit the scope of good-quality wheat exports,” he added.
Indian traders are in talks to make export deals with counterparts in Bangladesh and Myanmar for the current marketing year, trade sources said.
“The government’s stock cannot be exported,” a trade source said. “The rise in government stocks may limit the supply of the grain and push up prices in the global markets. It might make it difficult to export at high prices.”
Last year, the pace of government purchases was slow as the country had gone into a complete lockdown to curb the spread of COVID-19, an official with the FCI said.
Poor procurement had kept wheat prices low in domestic markets and allowed exporters to buy cheaper grain at the beginning of the year and offload in the global market.
“This year government agencies made arrangements in advance to ensure they are able to procure ample quantity of wheat from farmers,” an official said.
In the current crop year, which ends in June, India is likely to harvest 109.2 million mt of wheat, the largest on record.
“The estimate for the overall procurement this year is nearly 40% of the total produce,” a Bangalore-based trader said. “If the actual procurement tops the estimated figure, it will further limit the availability of grains for exports.”
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