India’s boom in wheat exports benefits farmers and budget relief

Farmers use a combine to deposit harvested wheat into a tractor trailer in a field on the outskirts of Indore, India’s central state of Madhya Pradesh, March 22, 2022. REUTERS/Rajendra Jadhav

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INDORE/SARANGPUR, India, April 29 (Reuters) – For the first season in more than a decade, Indian farmer Rajensingh Pawar is selling his new wheat crop to private traders rather than the state stock, as a global rise in wheat prices disrupts suppliers of India a rare profitable export window.

Strong demand after Russia’s invasion of Ukraine means growers are receiving the highest prices ever for their crops, while also easing pressure on the state’s grain purchasing agency, which runs up huge debts as a last resort.

The heyday has arrived as Pawar and his colleagues harvest a record crop of Indian wheat, giving growers a rare opportunity to sell the grain, just as world prices remain close to all-time highs.

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“After a long time, traders are willing to pay more than the MSP,” said Pawar, 55, referring to the minimum support price at which the Food Corporation of India (FCI) buys grain from farmers.

“India’s soaring wheat exports have helped farmers like us achieve much better returns,” he said, unloading wheat at a grain market in Madhya Pradesh state, known for its top-quality wheat.

World wheat prices since 2005

Before the nearly 50% rise in global wheat prices, India struggled to export the grain because of annual increases in the MSP to appease the politically powerful farmers’ lobby that made Indian wheat more expensive than world prices.

But a rare coincidence of high international prices, consecutive record crops, a weaker rupee against the dollar and improved internal logistics have made shipments from India attractive.

“This is a golden opportunity for India to export its surpluses,” said Nitin Gupta, vice president at food and agriculture company Olam Agro India.

For international wheat markets, India’s sales are helping to offset a supply shortage due to Ukraine-induced disruptions in the Black Sea region, crop restrictions in Canada and quality reductions in Australia. read more

Wheat export by major suppliers

For the Indian authorities, strong demand from private grain processors at prices above the MSP of 20,150 rupees ($262.88) per tonne means FCI’s wheat purchases are expected to plummet for the first time in decades.

Lower government purchases, in turn, mean big budget savings. Last year, India spent 856 billion rupees ($11.2 billion) buying a record 43.34 million tons of wheat from farmers, filling state granaries to the brim and raising the national debt.

This year’s FCI purchases could fall below 30 million tons, trade and government officials said, meaning less government capital tied up to buy and store crops.

Indian traders have signed deals to export wheat for between $330 and $335 per tonne free on board, said Rajesh Paharia Jain, a New Delhi-based trader. This is nearly $50 per tonne cheaper than competing suppliers, as the rise in global prices and large domestic surpluses have made it easier for Indian suppliers to offer a discount, but still well above local prices.

Wheat production and export from India since 2000

After a wave of export deals signed in February and March, Indian wheat shipments reached a record 7.85 million tons in the fiscal year to March, up 275% from the previous year. read more

Exports could soar to 12 million tons in fiscal year 2022-23, traders said, making it a serious player in global markets.

Indian exports were also helped by a sharp jump in crop quality. Previously limited to cost-sensitive markets that accepted lower quality products, exporters have recently sold to some of the world’s most discerning wheat consumers.

For the first time, Egypt’s largest global wheat importer has bought the grain from India, which sources say has helped India build a reputation as a top-tier supplier. read more

The rapid and widespread adoption of higher quality seeds has supported the increase in quality. Gyanendra Pratap Singh, head of the Indian Institute of Wheat and Barley Research, was introduced in the past decade and accounted for more than 70% of the approximately 31.5 million hectares planted with wheat last season.

“In the past, India was not known for its quality wheat, but India’s wheat is now as good as any high-quality wheat from other major global suppliers, due to new seed varieties,” Singh said.

In addition to improved farming practices and greater mechanization, better seeds have transformed the Indian wheat market from mainly low-quality feeds to one that is abundant in superior qualities such as Durum, Lokwan and Sharbati used in pizzas, pastas and high-end bakery products.

“New varieties have helped farmers get higher yields with better protein content,” said Amit Takkar, head of brokerage Conifer Commodities.

“Indian wheat with 12% to 13% protein is now quite common and that compares favorably with APWs (Australia Premium White) 11.5% to 12% protein.”

Sudhanshu Pandey, the top official of the Ministry of Food, praised farmers and scientists for helping India emerge as a new force in wheat markets.

The only impediment to that rosy outlook could be a drop in crop yields this year due to a sudden rise in temperature in mid-March, traders said.

The government has forecast wheat production for this year at a record 111.32 million tons, but may revise that estimate if the recent hot spell undermines crops that continue to seep into wholesale grain markets.

In Madhya Pradesh’s grain market, farmers cheer about the export.

“Quick payments and higher prices for better wheats are a rarity for us,” says farmer Narendra Pariyar. “The boom in wheat exports has really been a gold mine for farmers.”

($1 = 76.65 rupees)

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Reporting by Mayank Bhardwaj and Rajendra Jadhav; adaptation by Gavin Maguire and Richard Pullin

Our Standards: The Thomson Reuters Trust Principles.

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