India: Heatwave may hit wheat output, growth may be far below expected; analysts fear price rise

A possible heatwave is expected to hit wheat crop output, limiting the growth far below earlier estimates, sending wheat prices soaring, and prompting government restrictions on exports. The hottest February this year since 1901 has prompted predictions of increasing heat waves in March-May, raising concerns that wheat grain will not get time to develop completely. Analysts estimate wheat production to be around 98 MMT which is just 1.6% higher as compared to previous forecasts of 4%. Wheat prices will also fluctuate if the crop gets damaged by more than 10%; however, ensuing restrictions on wheat, and a larger sowing area this year may keep the country immune to some extent from the crisis.

Earlier this week, India’s chief economic advisor V Anantha Nageswaran said that there is an element of uncertainty in agri production if the heatwave forecast is accurate. “The forecast of high temperatures and heat waves in the month of March will have a negative impact on the wheat crop. Due to this, wheat grains will not get time to develop completely. Its maximum impact will be seen in parts of Punjab, Haryana, UP and Madhya Pradesh, where the crop is sown late. Therefore, we believe that wheat production will be in the range of 98 MMT, which is 1.6% higher than last year. Earlier the yield was estimated to be more than 4% as compared to last year,” said analysts at Origo Commodities.

“Wheat grains are unable to grow in some areas due to the premature arrival of summer. Due to this, there is a drop in the yield. If the damage is more than 10%, then there will be an increase in the prices of wheat. Mustard, coriander and cumin crops can also be affected,” said Ajay Kedia, director of Kedia Commodity.

“India had already witnessed a similar situation last year with the government incorporating additional measures such as restricting exports in order to boost domestic supplies. Similar steps coupled with maintaining adequate buffers will keep the country immune from any such crisis,” said Jahnavi of Bank of Baroda.

“The rising temperature may impact the wheat crop, but last year there was a significant increase in wheat prices, due to which farmers sowed wheat in the larger area this time. With the increase in area, the yield is also expected to increase. This can do a little bit of damage control. But it will affect the prices. The godowns are lying vacant due to an increase in distribution under the government ‘Garib Kalyan Yojna’. This can further affect the price,” said Anuj Gupta, VP-Research (Commodity), IIFL.

The government tried to allay concerns over the impact on wheat crop output. While IMD warned of even hotter temperatures in March saying that there is a high probability of above-normal temperatures in some parts of India in the three months, Union Food Secretary Sanjeev Chopra last week said that wheat crops are unlikely to get damaged although temperatures are a little bit on the higher side and exuded confidence of achieving a record output of 112 million tonnes in this crop year ending June.

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