In demand. India turns major wheat supplier in South, West Asia as global prices soar

India has turned a major wheat supplier for countries in South Asia and the Indian Ocean Region, mainly West Asia, as prices in the global market have surged near eight-year high, according to officials and industry experts .

Rising freight charges have also resulted in these countries turning to India to meet their wheat demand.

According to Agricultural and Processed Food Products Export Development Authority (APEDA), India exported 19.86 lakh tonnes (lt) of wheat during April-August fiscal compared with 2.63 lt during the year-ago period.

USDA projection

The United States Department of Agriculture, in its “Grain: World Market and Trade” report, projected India’s wheat exports at 45 lakh tonnes (lt), the highest since it shipped 55.72 lt in 2013-14. The foodgrain’s shipments is estimated to have topped last year’s total shipments of 20.86 lt by now.

“Basically, Indian wheat is in demand as Russia and Australia are quoting higher prices for their produce. Increasing freight rates have also contributed to the demand for Indian wheat,” said Rajnikant Rai, Divisional Chief Executive, ITC Agri-Business.

India wheat has not just gained in volume but in price too. “In April, we began exporting wheat at $265 a tonne. Currently, we are exporting at $315-18 a tonne,” Rai said.

Compared with this, Argentina is quoting at $296, France at $327, US soft red winter wheat at $322, Australia feed wheat at $433 and Black Sea wheat (Russia, Ukraine) at $312.75 a tonne.

The higher prices in the global market are reflected in domestic prices too, which are ruling around this year’s minimum support price (MSP) level of ₹1,975.

Millers aggrieved

“Exports and current prices have made things difficult for the domestic milling industry. We are having to pay ₹25 a kg for wheat from ₹20-21 a couple of months ago,” said Pramod Kumar, Vice-President, Roller Flour Mills Federation of India.

Though officials involved in exports say that millers can avail of wheat from the Food Corporation of India (FCI), which is selling the stocks it is holding at prices depending on which year the crop was harvested, Kumar said tender norms had made it difficult for any miller to bid.

However, exporters say they are procuring wheat from the open market for shipments abroad. “We are not supposed to export wheat stocks purchased from FCI,” said Rai.

Centre’s strategy

A Delhi-based multinational firm’s export-import official said the Centre’s strategy could be to keep growers happy in States such as Uttar Pradesh, Punjab and Uttarakhand, where Assembly elections are due in six months time.

A trade analyst said the Government could be encouraging exports of wheat on two counts. One, it will help reduce the huge inventories that are being carried every year. Two, it could also be to lessen FCI’s debt burden, which is nearly ₹five lakh crore.

“Also, with trader partners putting pressure on India at the World Trade Organisation to end MSP, the Centre could be trying to ship more when the situation is favourable,” he said.

FCI stocks

As on October 1, the FCI had 46.85 million tonnes of wheat stocks compared with 43.73 million tonnes during the year-ago period. The Corporation is mandated to have 17.5 million tonnes of operational stock and two million tonnes of strategic reserve during the period.

Mukesh Singh, Director, MuBala Agro Commodities Pvt Ltd, said Bangladesh is placing orders on a daily basis for Indian wheat. “For Bangladesh, it is cheaper to buy Indian wheat in particular since freight costs are low,” he said.

As per APEDA data, Bangladesh imported 13.13 lt of wheat during April-August compared with 11.57 lt for the entire 2020-21 fiscal. The USDA has pegged Bangladesh’s wheat imports at 74 lakh tonnes this year.

Shipments by road

Most of the wheat consignments go by road to the neighbouring country and trucks carrying wheat account for almost a third of the total vehicles crossing the Ghojadanga border. For example, on October 19, 92 trucks carried wheat to the neighbouring country out of the 312 that passed through the border.

“We are able to get fair average quality wheat at ₹19.50-21 a kg from Bihar, Bengal and Odisha. Wheat is available in Uttar Pradesh also, but freight is costly,” Singh, who firm exports wheat and corn, said.

ITC’s Rai said Bangladesh and West Asian countries were the two major buyers of Indian wheat this year. “Plus, Indian wheat has begun going to Indonesia and the Philippines,” he said.

One major reason for Indian wheat to make inroads in the global market is that besides being competitive, its quality has also improved, Rai said.

Prospects good till March

The ITC official expects the current pace in wheat exports to continue till the end of the current fiscal. “No other crops can hit the market until then. The importers are countries that buy regularly and India has now emerged as an option,” Rai said.

The USDA has projected global wheat consumption to increase sharply than production this year. As a result, global wheat exports would be at record levels resulting in stocks dropping to a five-year low.

Global output will be only marginally higher as production in the US, Canada, Kazakhstan and Iran have been affected. The decline in Canadian production will result in the North American nation shipping 15 million tonnes of wheat lower this year. India is seen gaining a chunk of the gap, with Australia and Europe being projected as the other gainers.

India has also been helped by record wheat production over the past two years. During 2019-20, India produced 107.86 million tonnes and in 2020-21, the output increased to 109.52 million tonnes.