Report Highlights:

On October 19th, 2015, the Ministry of Finance issued a notification raising the basic custom duty on imports of wheat to 25 percent (ad valorem on CIF value). MY 2015/16 wheat imports are revised lower to 500,000 MT as the duty hike precludes additional imports. MY 2015/16 corn exports are forecast lower to 1.5 MMT on uncompetitive price of Indian corn. MY 2014/15 rice exports are estimated at a record 11.8 MMT.

RICE

India: Commodity, Rice Milled, PSD

(Area in Thousand Hectares, Quantity in Thousand Metric Tons, Yield in MT/Hectare)

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

India

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

44,136

44,136

43,000

43,000

43,200

43,000

Beginning Stocks

25,440

25,440

22,757

22,757

16,606

17,660

Milled Production

106,646

106,646

104,800

104,800

103,500

103,000

Rough Production

159,985

159,985

157,216

157,216

155,266

154,515

Milling Rate (.9999)

6,666

6,666

6,666

6,666

6,666

6,666

MY Imports

-

-

-

-

-

-

Total Supply

132,086

132,086

127,557

127,557

120,106

120,660

MY Exports

10,149

10,149

11,700

11,800

9,000

9,000

TY Exports

10,907

10,907

11,500

11,500

9,500

9,000

Consumption and Residual

99,180

99,180

99,251

98,097

99,200

99,000

Ending Stocks

22,757

22,757

16,606

17,660

11,906

12,660

Total Distribution

132,086

132,086

127,557

127,557

120,106

120,660

Yield (Rough)

3.6248

3.6248

3.6562

3.6562

3.5941

3.5934

Production

Post continues to estimate MY 2015/16 milled rice production at 103 million metric tons (MMT) on weak 2015 monsoon during August and September. However, planted area is revised marginally lower to 43 million hectare due to the early withdrawal of 2015 monsoon, which affected late kharif (fall harvested) planting. The Ministry of Agriculture (MoA) estimates rice area planted through October 16, 2015 at 37.82 million hectares compared to 37.97 million hectares last year on lower late season planting in the drought affected southern states of Andhra Pradesh and Tamil Nadu. Market sources also expect that rabi (winter planted) rice planting will also be slightly lower than last year due to ongoing soil moisture stress and lower availability of irrigation water.

Due to the timely planting and early withdrawal of monsoon, harvest of kharif rice began on schedule in the last week of September and will be over by end-October in the northern states (Punjab, Haryana, Rajasthan, west Uttar Pradesh). Initial harvest reports suggest slightly lower yields compared to last year due to moisture stress at critical reproductive and grain production stages. Harvesting has commenced in other states and will continue through mid-December and market sources suggest that rice yields are likely to be lower than last year in most states.

Government Procurement Begins on a Strong Note

Government procurement of MY 2015/16 rice under the minimum support price (MSP) is significantly ahead of last year due to the timely harvest of rice unlike last year where harvest was delayed by about two weeks due to October rains. Government procurement through October 25, 2015, is estimated at 6.54 MMT compared to 5.05 MMT during the corresponding period of MY 2014/15. Most of the procurement is currently limited to the northern states, but will gradually spread to other parts of the country from November onwards as harvest progresses.

Based on the production and procurement estimates suggested by various states, the government has set the MY 2015/16 kharif rice procurement target of 30 MMT compared to MY 2014/15 kharif rice procurement of 25.3 MMT (target 30.1 MMT). Market sources report that the government's MSP (INR 14,100/MT for common paddy rice) is above the open market price of unmilled paddy rice supporting government procurement. However, overall procurement is likely to depend on open market prices in other states, which could be affected by forecast lower productivity.

Prices Ease

Domestic prices have eased in October on relatively strong early season arrival of the MY 2015/16 crop. Prices are expected to ease further in November with the arrival of the new crop across the country. However, domestic prices during the marketing year will largely depend on the domestic crop harvest and export demand.

MY 2014/15 Exports Raised

Post's MY 2014/15 export estimate is raised marginally higher to a record 11.8 MMT based on the preliminary official statistics for October 2014 to August 2015, and September 2015 data compiled by private source. Market sources report continued strong exports of coarse non-Basmati rice varieties from May 2015, mostly to African and neighboring markets.

India's rice export during the first nine months of CY 2015 is estimated at 8.7 MMT compared to 7.8 MMT during the corresponding period last year. Pace of exports are likely to remain steady in the last quarter of CY 2015 on expected weak domestic prices and steady export demand. Consequently, Post continues to estimate CY 2015 exports at a record 11.5 MMT.

Post continues to forecast MY 2015/16 and CY 2016 rice exports at 9.0 MMT on forecast tight supplies.

Stocks/Consumption Revised

MY 2014/15 ending stocks have been raised to 17.7 MT based on the latest official rice stock estimates. MY 2014/15 consumption has been lowered to 98.1 MMT to reflect the changes in exports and ending stocks. MY 2015/16 ending stocks have been raised to reflect the increase in opening stocks assuming no significant change in the forecast consumption estimate.

Due to relatively strong procurement and weak offtake in September 2015, the government-held rice stocks on October 1, 2015, were officially estimated at 14.2 MMT against the initial expectations of 12.0 MMT. While there is no published information on rice stocks held by private trade, the relatively strong export offtake since June 2015 is likely to have drawn down the stocks held by exporters. MY 2014/15 ending stocks held by private trade is estimated lower at 3.5 MMT compared to last year's 5.2 MMT. Consequently, MY 2014/15 ending stocks are estimated at 17.7 MMT compared to 22.8 MMT last year, barely sufficient to meet consumption requirement for two months.

WHEAT

India: Commodity, Wheat, PSD

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Apr 2013

Apr 2014

Apr 2015

India

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

30,000

30,000

31,530

30,473

30,600

30,600

Beginning Stocks

24,200

24,200

17,830

17,830

17,200

17,200

Production

93,510

93,510

95,850

95,850

88,940

88,940

MY Imports

25

25

52

52

800

500

TY Imports

22

22

273

273

800

500

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

117,735

117,735

113,732

113,732

106,940

106,640

MY Exports

6,053

6,053

3,402

3,402

500

500

TY Exports

5,354

5,354

1,694

1,694

300

300

Feed and Residual

4,800

4,800

4,500

4,500

4,800

4,800

FSI Consumption

89,052

89,052

88,630

88,630

89,740

89,440

Total Consumption

93,852

93,852

93,130

93,130

94,540

94,240

Ending Stocks

17,830

17,830

17,200

17,200

11,900

11,900

Total Distribution

117,735

117,735

113,732

113,732

106,940

106,640

Yield

3.1170

3.1170

3.0400

3.1454

2.9065

2.9065

Import Duty on Wheat Raised to 25 percent

On October 19th, 2015, the Ministry of Finance issued a notification raising the basic custom duty on imports of wheat to 25 percent (ad valorem on CIF value). Earlier on August 7, 2015, the government had imposed an import duty of 10 percent advalorem effective till March 31, 2016, i.e., end of MY 2015/16. Market sources report that the GOI decision to raise import duty was due to concern about the improved prospects for imports and relatively weak off take of government held wheat in the recent months.

Domestic prices have surged since end-September on tight supplies of quality wheat. Recent hike in domestic prices coupled with relatively weak international wheat prices had improved prospects for imports of wheat in early October. Market sources reported renewed interest in exploring opportunities for import of wheat after the lull since August when 10 percent import duty was introduced.

Government-held wheat stocks on October 1, 2015 are officially estimated at 32.5 million metric tons (MMT), marginally higher than the last year levels, despite government efforts to liquidate the 'rain affected' MY 2015/16 wheat. Sources report that the offtake of government wheat during August-September 2015 was estimated at 4.3 MMT compared to 5.8 MMT during the same period last year.

Consequently, the government raised the import duty on wheat to curb any prospects for wheat imports. Market sources report that imports of wheat at 25 percent import duty is not feasible at current domestic prices.

MY 2015/16 Imports Lowered

Post's MY 2015/16 wheat imports are revised lower to 500,000 MT due to the recent increase in the import duty (25 percent) which precludes further wheat import in the marketing year. Provisional official figures estimate MY 2015/16 wheat imports during April through September 2015 at 429,000 MT. Assuming no significant changes in the current price parity between domestic and international wheat prices, imports are likely to be limited to 500,000 MT.

MY 2015/16 consumption estimate is revised marginally lower to reflect the change in the import estimate. Post continues to estimate other PSD figures unchanged from the last updates.

CORN

India: Commodity, Corn, PSD

(Area in Thousand Hectares, Quantity in Thousand Metric Tons, Yield in MT/Hectare)

Corn

2013/2014

2014/2015

2015/2016

Market Begin Year

Nov 2013

Nov 2014

Nov 2015

India

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

9,430

9,066

9,300

9,300

9,200

9,200

Beginning Stocks

651

651

1,447

1,447

2,027

2,027

Production

24,260

24,260

23,670

23,670

23,000

22,500

MY Imports

7

7

10

10

50

50

TY Imports

11

11

10

10

50

50

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

24,918

24,918

25,127

25,127

25,077

24,577

MY Exports

3,871

3,871

1,100

1,100

2,000

1,500

TY Exports

3,889

3,889

1,100

1,100

2,000

1,500

Feed and Residual

10,600

10,600

12,500

12,500

12,800

12,800

FSI Consumption

9,000

9,000

9,500

9,500

9,500

9,500

Total Consumption

19,600

19,600

22,000

22,000

22,300

22,300

Ending Stocks

1,447

1,447

2,027

2,027

777

777

Total Distribution

24,918

24,918

25,127

25,127

25,077

24,577

Yield

2.5726

2.6759

2.5452

2.5452

2.5000

2.4457

Production

Post continues to estimate MY 2015/16 corn production at 22.5 MMT on expected lower yields due to deficient 2015 monsoon rains, particularly in July and August. Harvest of the new crop commenced from the second week of October and is likely to continue through November in the major producing states. Post field trip to the southern state of Karnataka and field reports from other states indicate that the corn yields in the unirrigated area are lower than last year's crop due to moisture stress at the critical stage (tassling, silking, and seed setting). Early withdrawal of 2015 monsoon and continued dry conditions in the rain fed central and southern states is likely to affect planting of the upcoming rabi corn. Consequently, Post continues to estimate MY 2015/16 production at 22.5 MMT from 9.2 million hectares.

Domestic Prices Firm

Despite the onset of new crop harvest and weak export demand, domestic prices have firmed up in October suggesting tight domestic supplies.

Currently, the wholesale prices in the major producing states is ranging from INR 13,170 ($206) to 14,100 ($220) per metric ton. Market sources expect domestic prices to remain steady in November on speculation on the size of the domestic harvest and will largely depend on domestic demand during the season as exports are not feasible at these prices.

MY 2015/16 Exports Lowered

Due to the uncompetitive prices in the international market, Indian corn exports have continued to stagger lower since March 2015. Assuming no significant change in the price parity between Indian corn vis-à-vis corn from other origins, Post's MY 2015/16 corn exports are forecast lower to 1.5 MMT, mostly limited to neighboring countries (Bangladesh, Nepal and Sri Lanka) and some containerized exports to South Asian countries.