Report Highlights

Sufficient and well distributed 2016 monsoon rains have supported planting of fall/early winter harvested kharif crops (rice, corn, and other coarse grains). MY 2015/16 ending stocks estimate is raised to 18.5 MMT on estimated higher government rice stocks. Government allows imports of corn under the Indian fiscal year (IFY) 2016/17 (April/March) tariff rate quota (TRQ) on rising domestic prices, but import prospects constrained due to non-GM requirement.

2016 Monsoon Covers the Country

The southwest monsoon covered the entire country passing the north/northwest region by July 13, 2016, couple of days ahead of the normal schedule. With the strong recovery in the monsoon since last week of June, the cumulative rainfall for the week ending July 20, 2016 was one percent above normal, with about 30 of the 36 weather subdivisions receiving normal and above normal rains. Region wise, the cumulative rainfall in Central India was 13 percent above normal, Northwest India was 6 percent above normal, Southern Peninsula was 3 percent above normal, but only the relatively high rainfall region of East and Northeast India was 17 percent below normal. The Indian Metrological Department continues to forecast near normal or above normal rainfall over most of the country through first week of August. On June 2, 2016, the India Meteorological Department (IMD) in its long range forecast update on 2016 monsoon said the overall precipitation likely to be 104 percent of LPA during August

Kharif Planting Progress Steady

After a relatively delayed and weak early monsoon, timely and sufficient 2016 monsoon rains since early July supported strong recovery in planting of kharif crops during the ongoing season. Water levels in the reservoirs have improved significantly in July, providing more water for irrigation.

The Ministry of Agriculture (MoA) estimates total area sown till July 22, 2016 at 69.3 million hectares compared to 67.1 million hectares same time last year, with most of the increase accounted by higher acreage under pulses, coarse cereals and rice.

Planting of Kharif Crops in Indian Crop Year

With the forecast of sufficient 2016 monsoon rains through August, planting of most kharif crop is likely to conclude on time by mid-August. However, planting of rice in northern (mostly long grain Basmati) will continue through August and in some parts of south India through early September. Planting of pulses and coarse grains, typically sown in unirrigated areas, has been significantly ahead of last year on optimal soil moisture conditions, and is likely to be over by end-July. Planting of pulses has been significantly higher supported by high market prices and government's minimum support prices. Sufficient rains since July and consequent favorable planting conditions in the major grain producing states is likely to support Post's MY 2016/17 kharif grain area and production forecast. Sufficient and well distributed rains throughout August and September will be critical for achieving forecast normal yields. However, heavy rains and prolonged floods in traditionally flood prone eastern India may adversely affect the crop prospects.

RICE

India: Commodity, Rice Milled, PSD

(Area in Thousand Hectares, Quantity in Thousand Metric Tons)

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct 2014

Oct 2015

Oct 2016

India

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

44110

44110

43460

43460

44000

44000

Beginning Stocks

22757

22757

17766

17766

13766

18500

Milled Production

105480

105480

103500

103500

105000

105000

Rough Production

158236

158236

155266

155266

157516

157516

Milling Rate (.9999)

6666

6666

6666

6666

6666

6666

MY Imports

0

0

0

0

0

0

TY Imports

0

0

0

0

0

0

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

128237

128237

121266

121266

118766

123500

MY Exports

12238

12238

9200

9200

8500

8500

TY Exports

11046

11046

9000

9200

8500

8500

Consumption and Residual

98233

98233

98300

93566

98600

98600

Ending Stocks

17766

17766

13766

18500

11666

16400

Total Distribution

128237

128237

121266

121266

118766

123500

MY 2016/17 Planting

Buoyed by adequate and well distributed monsoon rainfall in July, rice area planted through July 24, 2015 is estimated higher at 18.9 million hectares compared to 17.7 million hectares last year and the normal (5-year average) planting for the corresponding period. Higher planting of rice is reported in most states except Haryana, Uttar Pradesh and some eastern states where planting in some of the low lying areas may have been delayed due to heavy rains over the last two weeks.

Planting is currently in full swing in most states and is likely to be over on schedule by mid-August. Planting of long-grain Basmati rice in Punjab, Haryana and western Uttar Pradesh, as well as rice in coastal Andhra Pradesh and Tamil Nadu will continue through the end of August-early September.

Basmati area is likely to reduce this year due to relatively weak prices last year that affected farmer earnings in 2014. A clear picture for India's MY 2016/17 rice production prospects will emerge by end of August after planting is over in most states.

Assuming normal rainfall during August/September and normal weather conditions through harvest (October/November), Post continues to forecast MY 2016/17 production at 105 MMT from 44 million hectares. However, excess rains and prolonged floods in August/September and major cyclonic build up and heavy rains in September/October could lower the forecast.

Prices Firm

Domestic prices have firmed up in July on steady export demand in the recent months. Satisfactory planting of MY 2016/17 rice crop and sufficient government rice stocks are likely to keep prices steady in the next couple of months.

Government Procurement Strong, Offtake Weak

Government rice procurement during the ongoing season has been supported by sufficient domestic production and relatively weak export demand in the early part of the marketing year (October 2015 – February 2016). Total MY 2015/16 rice procurement through July 26, 2016, is estimated at 34.1MMT compared to 31.6 MMT during the same period last year, with the increase largely accounted by the northern states (Punjab, Haryana and Uttar Pradesh). With some additional procurement in eastern and southern states through September, total MY 2015/16 rice procurement is estimated at 34.6 MMT, about 8 percent higher than last year and marginally lower than the record procurement of 35 MMT in MY 2011/12.

Market sources report that the MY 2015/16 government rice offtake under the public distribution system (PDS) has been relatively weak as government made a concentrated effort to off load the MY 2015/16 (April/March) rain damaged wheat. Based on the latest available official figures, average monthly offtake of rice during the first nine months of MY 2015/16 was estimated at 2.6 MMT/month compared 3.0 MMT/month for the same period in MY 2014/15. Market sources expect rice offtake in the last quarter to improve as government off load more rice through various programs instead of wheat due to current tight government wheat stocks.

Ending Stocks Raised

Post's MY 2015/16 ending stocks estimate is raised to 18.5 MMT (16.2 MMT government rice and 2.3 MMT private) on higher government rice stocks due to higher procurement and relatively weak offtake. MY 2016/17 ending stocks are also forecast higher at 16.4 on forecast normal procurement and government offtake assuming forecast production.

Government-held rice stocks as of July 1, 2016, are officially estimated at 24.7 MMT, about 3 MMT higher than last year level. Government rice stocks on October 1, 2016, are projected at 16.2 MMT on expected normal procurement and relatively stronger monthly offtake (3.0 MMT/month) due to tight government wheat stocks in the last quarter (July-September). Relatively weak export demand right from the beginning of the marketing year discouraged private trade to purchase rice to cover future demand. Consequently, MY 2015/16 ending stocks with private trade is estimated lower at 2.3 MMT compared to 3.6 MMT last year.

Consumption Lowered

MY 2015/16 consumption has been revised lower to 93.6 MMT to account for the revised ending stocks.

Exports Steady

Indian rice exports have steadied since the beginning of CY 2016 on recovery in export demand for Basmati rice and non-Basmati rice from African countries.

Rice exports for the first five months of CY 2016 4.4 MMT, down about 15 percent compared to the same period last year. There has been a recovery in export demand for Basmati rice (largely due to competitive prices) and revival of demand for non- Basmati rice in African countries. However, exports prospects to neighboring Bangladesh, the leading market for non-Basmati, is unlikely to improve as Bangladesh government has further raised the import duty on rice. Assuming no significant changes in the export demand and price parity for Indian rice vis-a-vis other origin, CY 2016 (MY 2015/16 exports) will reach the estimated 9.2 MMT at the current pace of exports. Post continues to forecast CY 2017 (MY 2016/17) rice exports unchanged at 8.5 MMT.

WHEAT

Market prices in the major producing states currently range from INR 13,500 ($201) to INR 18,000 ($268) per metric ton (spot). Prices are expected to remain firm in August/September on tight supplies, but favorable MY 2016/17 planting and production prospects and expected weak international prices are likely to contain significant price movements in the future.

Govt allows Extension on Imports under TRQ

With the growing concerns on the rising corn prices raised by the local corn users (poultry and starch industries), government is exploring the option of importing relatively cheaper corn from the international market under the tariff rate quota (TRQ) of 500,000 metric tons at zero duty in the Indian fiscal year 2016/17 (April/March). On July 11, 2016, the government gave an extension to the government parastatals responsible for canalizing imports under the TRQ to apply for the IFY 2016/17 TRQ from March 31, 2016, to August 8, 2016. The three government parastatals issued notification to actual buyers seeking their interest in importing non-genetically modified corn under the TRQ (PEC, STC and MMTC) based on which they will be applying for the IFY 2016/17 TRQ.

Non-GM Condition Constrain Import Prospects

Meanwhile on July 14 and July 15, 2016, the PEC issued two tenders for importing 120,000 MT of non-GM corn under specific conditions in different ports, which was cancelled due to lack of response from the exporters (only one bid quoted at $252/MT). STC and MMTC have also issued tenders, but market sources report that these tenders may not get adequate response due to lack of supplies of corn that can be certified non-GM from the exporting country. Consequently, Post continues to estimate MY 2015/16 corn imports unchanged at 250,000 MT.

Since the TRQ is applicable through March 2017, the PEC has issued a tender for 200,000 MT of non-GM corn for imports during mid-December through end-January, the period after the kharif corn and before the rabi corn marketing season. Market sources report that the tender may receive more interest as the future prices quotes for the period are very competitive. Post continues to forecast MY 2016/17 corn imports at 200,000 MT due to the spillover of the IFY 2016/17 TRQ imports.