WHEAT

India Set for Bumper 2014 Wheat Crop on Record Planting

The Ministry of Agriculture’s 2013/14 rabi (winter planted) crop planting report estimates planting of 2014 wheat crop at a record 31.5 million hectares compared to 29.6 million hectares last year. Favorable planting conditions coupled with expectations of good market prices encouraged farmers to bring more area under wheat in most states, especially in the rainfed wheat growing states of Madhya Pradesh, Uttar Pradesh, Gujarat and Rajasthan. Sufficient 2013 monsoon rains and timely harvest of the preceding kharif (fall harvested) crops provided excellent planting conditions. Relatively strong market prices during MY 2013 and the expectations of additional bonuses from the state governments (over and above the government of India’s (GOI) minimum support price) due to the upcoming Parliamentary elections in April 2014 further encouraged farmers to plant wheat.

Field sources report that the standing wheat crop is progressing well under adequate soil moisture and weather conditions throughout the wheat growing region. Low temperatures and sporadic rains during December/January have been generally beneficial. There have been no incidences of pest or disease in the major growing areas. Record planting coupled with favorable growing conditions to date have fueled the expectation of a bumper 2014 wheat harvest. With the official advance estimate expected in the first fortnight of February, trade sources estimate the crop in the range of 94 to 98 million metric tons (MMT). However, temperatures during the critical filling and ripening stages during February/March or unseasonal rains during harvest (March/April) could temper production prospects.

Prices Steady

With the government the dominant/major supplier to the domestic millers and exporters, domestic wheat prices ruled steady in the month of January.

Since November 2013, local millers have been sourcing government wheat for meeting the bulk of their consumption requirements as open market supplies of MY 2013 wheat have dried up (or are nearly exhausted). Government wheat is available to local millers under the open market sales scheme in the price range of INR 15,400 ($248) to INR 17,500 ($281) per ton plus local taxes in various states. With ‘sufficient’ government wheat stocks (28.0 MMT on January 1, 2014), relatively weak international prices, and prospects for another bumper harvest, domestic wheat prices are likely to ease in February/March.

Government Wheat Exports Sputter

Due to weak international prices, the government parastatals assigned to export government wheat against the two MMT export quota announced in August 2013 have struggled to find buyers for the tenders let since the last week of December. Consequently, the parastatals had to cancel some and only partially award most of the recent tenders due to low offer prices.

The January wheat tenders were awarded at prices ranging from $278.20 to $283.60 per ton FOB, well below the November high of $289.90 per ton. Market sources expect offer prices for the government wheat to ease further in the coming months, but may be higher than the government’s floor price of $260 per ton FOB. Consequently, the government parastatals are likely to tender the unallocated balance of the two MMT export quota during February-March for exports through April/May.

Provisional official trade statistics indicate that wheat exports for April to December 2013 reached 4.2 MMT (including 300,000 MMT of government wheat), with Bangladesh, U.A.E, and some African countries being the major buyers in recent months.

Trade sources estimate government wheat shipments in January 2014 at 300,000 metric tons. Given weak export demand, the shipment of government wheat from the two-MMT-quota is not likely to be over by end of March 2014 as some shipments will spill over to the next marketing year. Assuming bumper 2014 wheat production and timely harvest of early wheat in Gujarat and Rajasthan, exports of open market wheat may be higher than expected in March 2014. Consequently, Post continues to estimate MY 2013/14 wheat exports at 6.0 MMT.

CORN

MY 2013/14 Exports Lowered

Post’s MY 2013/14 corn export is estimated lower at 3.2 MMT on weak export demand. Provisional monthly trade estimates indicate a sharp decline in Indian corn exports since August 2013 due to relatively weak international prices on improved supplies from other competing origins compared to last year. MY 2012/13 exports have also been revised marginally lower to 4.67 MMT based on official trade figures compiled by the Global Trade Atlas.

Domestic corn prices have been relatively steady due to strong domestic demand from the poultry and starch industry, and the government’s intermittent intervention of procuring corn at the minimum support price (INR 13,100 or $212 per ton) in many states. Market sources report that the GOI has procured about 400,000 to 450,000 metric tons of corn under the minimum support price operation in the states of Andhra Pradesh, Maharashtra and Karnataka. The last corn procurement of this general magnitude was 328,858 metric tons in Indian kharif marketing season 2009/10 (October/September). Market sources also report a strong demand from the Indian poultry industry since October 2014 on improved consumer demand for poultry products and relatively lower feed prices. The off take by the starch industry is also strong to meet demand from the local textile industry on growth in textile exports.

Domestic spot prices of corn in the major producing states currently range from INR 11,640 ($188) to INR 13,650 ($220) per ton. Some corn is being exported to Bangladesh and south Asian markets at prices ranging from $235 to $240 per ton FOB, which is not competitive in the traditional destinations compared to the corn available from other competing origins. Market sources expect domestic prices to ease further with the harvest of rabi (winter) corn in Bihar and eastern India, where government procurement is not very effective. Corn exports are expected to improve in coming months assuming the current price parity of Indian corn vis-a-vis other origins remains unchanged. Consequently, MY 2013/14 corn exports are expected to reach 3.2 MMT compared to the last year’s record 4.67MMT.

Consumption/Stocks Adjusted

Post’s MY 2013/14 consumption and stocks have been revised to reflect the change in the export estimate.

RICE

Weak Government Procurement

MY 2013/14 government domestic rice procurement at the minimum support price continues to lag behind last year’s due to relatively firm market prices. Government procurement on January 17, 2014, was estimated at 18.7 MMT compared to 20.2 MMT during the corresponding period last year, with procurement lagging in most states except Chhattisgarh and Madhya Pradesh.

With market prices declining in January 2014, government procurement is likely to improve in the coming months. Overall procurement during MY 2013/14 will depend on the production of rabi (winter) rice to be harvested from March onwards, but is likely to be around 32 MMT compared to 34 MMT last year.

Market sources report that relatively weak export demand during November and December 2014 affected domestic prices. Currently, spot prices for common grade coarse rice range from INR 18,850 ($305) to INR 30,450 ($490) per ton in major producing states.

Exports Steady After Faltering in December

Preliminary CY 2013 export figures from official and private sources are estimated at 10.5 MMT.

Provisional shipment data from private sources indicate that rice exports in January 2014 improved after faltering in November and December 2013. With domestic prices easing in recent months, market sources report increased offtake of rice to Africa and other Middle East countries, and resurgence in exports of long grain Basmati rice to Iran after a lull during October to December 2013. Post continues to estimate MY 2013/14 exports at 10.0 MMT assuming no significant changes in the price parity of Indian rice in the international market