Indian Wheat Exports Seen at Record on Government Price Cut

Wheat shipments from India, the second-largest grower, may climb to a record as the government cuts the price for overseas sales, adding to supplies in a year when farmers are reaping the biggest global harvest ever.

Shipments are set to jump 32 percent to 7 million metric tons in the 12 months starting April 1 from 5.3 million tons a year earlier, according to Agrocorp International Pte, a Singapore-based trader. The food ministry has proposed that the government cut the minimum price to $260 a ton from $300 to reduce state reserves that are more than double normal needs and a decision may be made this week, officials said Oct. 24.

Futures in Chicago rebounded 7.6 percent since reaching a 14-month low in August on speculation dry weather in Argentinaand rains in Russia would hurt crops, even as the U.S. government predicts the global harvest will jump 8.2 percent to 708.9 million tons. The rally could fade should India ship more wheat than expected, according to Rabobank International.

Wheat declined 12 percent to $6.84 a bushel on the Chicago Board of Trade this year and reached a low of $6.355 on Aug. 14. Corn plunged 38 percent and the Standard & Poor’s GSCI index of eight agricultural commodities fell 18 percent.

Black Sea

Supplies from India compete with Black Sea milling wheat that contains 11.5 percent protein, said Tejinder Narang, an adviser with Emmsons International Ltd. (EMSI), a New Delhi-based exporter. Prices of this variety increased about 11 percent to as much as $277 a ton from $250 in August, while grain with 12.5 percent protein climbed 9.6 percent to $285, said Narang.

In Russia, planting of winter grain may be 4 million hectares (9.9 million acres) less than intended, with the most impact on wheat, Oil World said Oct. 15. The worst drought in 50 years in areas of Argentina, South America’s biggest exporter, resulted in “irreversible damage” to the crop, the Hamburg-based researcher said Oct. 22.

Wheat from India can fetch about $275 a ton free on board ship in Middle East, African and Asian markets and has a”natural geographical advantage” because of lower freight costs to those buyers, said Narang.

Imports by China, the top consumer, may more than triple to 9.5 million tons and tie with Egypt as the world’s biggest, according to the U.S. Department of Agriculture. Buying by Brazil and China to replenish inventories helped spur a 3.7 percent advance in prices last month, the most since April.

State stockpiles in India totaled 36.1 million tons at the start of this month compared with a normal requirement of 14 million tons, according to Food Corp. of India. The government buys about 30 percent of rice and wheat production from farmers at prices set by the state.

The harvest is estimated at 92.5 million tons in the year ended June, near the record 94.9 million tons a year earlier, according to the farm ministry. Shipments totaled 2.65 million tons between April 1 and Sept. 20 including 1.3 million tons from state reserves, government data show.