India’s wheat export boom brings boon to farmers and fiscal relief

Farmers use a combine harvester to dump harvested wheat into a semi-trailer, on a field on the outskirts of Indore in 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 instead of the state storekeeper, as he global rise in wheat prices gives Indian suppliers a rare profitable export window.

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

The boom times have arrived as Pawar and his peers reap a record crop of Indian wheat, giving growers a rare opportunity to sell the grain just as world prices remain at record highs.

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“After a long period, traders are ready 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.

“The increase in wheat exports from India has helped farmers like us who are getting a much better yield,” he said as he unloaded wheat at a grain market in Madhya state. Pradesh, known for its premium wheat.

World wheat prices since 2005

Before the nearly 50% surge in world wheat prices, India was struggling to export the grain due to annual MSP increases to appease the politically powerful agricultural lobby that was making Indian wheat more expensive than world prices.

But a rare confluence of high international prices, back-to-back record harvests, 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, Olam Agro India’s vice president for food and agribusiness.

For international wheat markets, sales from India are helping to offset a supply shortfall resulting from disruptions caused by Ukraine in the Black Sea region, crop cuts in Canada and quality downgrades in Australia. Read more

Wheat exports by major suppliers

For the Indian authorities, strong demand from private grain handlers at prices above the MSP of 20,150 rupees ($262.88) a tonne means that FCI’s wheat purchases are set to fall drastically for the first time in decades.

The decline in state purchases in turn means significant budgetary savings. Last year, India spent 856 billion rupees ($11.2 billion) to buy a record 43.34 million tonnes of wheat from farmers, fill state granaries to the brim and increase the national debt.

FCI purchases this year could fall below 30 million tonnes, trade and government officials said, meaning less public capital will be tied up in buying and storing crops.

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

Wheat production and exports in India since 2000

Following a flurry of export deals signed in February and March, India’s wheat shipments hit a record 7.85 million tonnes in the fiscal year to March, an increase of 275 % compared to the previous year. Read more

Exports could reach 12 million tonnes in the 2022-23 financial year, traders said, making it a serious player in world markets.

India’s exports were also helped by a strong increase in crop quality. Previously limited to cost-sensitive markets that accepted lower-quality produce, exporters have recently made sales to some of the world’s most discerning wheat consumers.

For the first time, the world’s largest wheat importer, Egypt, bought the grain from India, which sources say helped India build a reputation as a top supplier. Read more

Rapid and widespread adoption of better quality seed has supported quality improvement. Introduced over the past decade, the top 10 wheat seed varieties accounted for more than 70% of the estimated 31.5 million hectares planted with wheat last season, said Gyanendra Pratap Singh, head of the Indian Institute of wheat and barley research.

“Previously, India was not known for its quality wheat, but Indian wheat is now as good as any high quality wheat from other major global suppliers, and it is thanks to new varieties seed,” Singh said.

Along with improved farming practices and greater mechanisation, better seeds have transformed the Indian wheat market from mostly low-quality forage varieties to an abundance of higher qualities such as durum, Lokwan and Sharbati used in pizza, pasta, and high-end baked goods.

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

“Indian wheat with 12%-13% protein is quite common now and this compares favorably to APW’s (Australia Premium White) 11.5%-12% protein.”

Hailing farmers and scientists for helping India become a new force in wheat markets, Sudhanshu Pandey, a senior Food Ministry official, said the government was committed to helping India become a regular exporter of high quality wheat.

The only obstacle to that optimistic outlook could be a decline in crop yields this year due to a sudden rise in temperatures in mid-March, traders said.

The government has forecast this year’s wheat output at a record 111.32 million tonnes, but could revise that estimate if the recent heat wave undermines crops that continue to flow into wholesale grain markets.

In the grain market of Madhya Pradesh, farmers are jubilant about exporting.

“Prompt payments and higher prices for the best qualities of wheat are rare for us,” said farmer Narendra Pariyar. “The wheat export boom has really been a goldmine for farmers.”

($1 = 76.65 rupees)

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

Our standards: The Thomson Reuters Trust Principles.

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