Highlights

The MY 2016/17 wheat production forecast is revised lower to 87 million metric tons (MMT) based on continued tight domestic market supplies. The MY 2016/17 consumption forecast is revised lower to 89.6 MMT and ending stocks to 10 MMT. MY 2015/16 rice ending stocks have been raised higher to 18.4 MMT on higher government rice stocks. MY 2016/17 rice exports raised to 10.5 MMT on steady export demand.

WHEAT

India: Commodity, Wheat, PSD

Wheat

2014/2015

2015/2016

2016/2017

Market Begin

Apr 2014

Apr 2015

Apr 2016

India

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

30473

30473

31470

31470

30220

30220

Beginning Stocks

17830

17830

17200

17220

14500

14540

Production

95850

95850

86530

86530

90000

87000

MY Imports

51

51

471

471

3000

3000

TY Imports

273

273

300

300

3000

3000

TY Imp. from

0

0

0

0

0

0

Total Supply

113731

113731

104201

104221

107500

104540

MY Exports

3409

3406

1060

1129

400

400

TY Exports

1820

1834

872

873

400

400

Feed and Residual

4500

4500

4200

4200

4500

4500

FSI Consumption

88622

88605

84441

84352

91600

89640

Total Consumption

93122

93105

88641

88552

96100

94140

Ending Stocks

17200

17220

14500

14540

11000

10000

Total Distribution

113731

113731

104201

104221

107500

104540

Production Revised Lower

Post's MY 2016/17 wheat production forecast is revised lower to 87 million metric tons (MMT) based on the continued tight domestic market as reflected by abnormally strong offtake of government wheat by the private trade under the open market sale scheme (OMSS) and firm domestic prices despite improved import prospects of cheaper foreign wheat after the government lowered the import duty ( Various market and trade sources continue to estimate the crop in the range of 82-88 MMT against the Government's fourth advance estimate of 93.5 MMT.

Strong Offtake of Government Wheat

Official figures suggests that the offtake of wheat under the OMSS during April-September 2016 was estimated at 2.31 MMT compared to 0.48 MMT during the corresponding period last year. Historically, the private trade buys government wheat under OMSS after October when the market arrivals are over. The unprecedented higher offtake (five times) of government wheat during the first half of the ongoing marketing year suggests tight open market wheat supplies (marketed surplus minus government procurement).

Firm Prices despite Improved Import Prospects

Domestic prices have been very firm right from the beginning of the marketing year amidst strong speculation on the crop size and reports of farmers/local traders holding on to higher than normal stocks for late season sales. Due to the concerns on rising domestic prices and strong early season off take of government held-stocks, the government reduced the import duty from 25 percent to 10 percent to improve supplies through imports. After a slight lull in prices in September, domestic wheat prices have firmed up further in October despite improved import prospects.

The resurging domestic prices strongly suggest tighter than initially expected open market wheat supplies. Local farmers/traders are unlikely to hold on to the wheat after the arrival of the kharif harvest. The ongoing speculation on higher imports of cheaper foreign wheat and government's proposal to further lower the import duty to check rising domestic prices also discourages stocking of wheat. Consequently, Post's MY 2016/17 wheat production forecast is revised lower to 87 MMT.

Ending Stocks Lowered

Due to the relatively weak government procurement (22.9 MMT vs 28.1 MMT last year) and strong off take during the first half of the marketing year, government-held wheat stocks on October 1, 2016 are officially estimated to have come down to 21.7 MMT, nearly 11 MMT lower than same time last year, and just above the government's desired stocks of 20.5 MMT.

The government decision to lower the import duty is likely to contain the off take under OMSS, particularly in south and peninsular India. However, government is committed to supply wheat under National Food Security Act (NFSA) and other government food schemes, but can marginally replace wheat for rice in the government programs. Assuming relatively tight government supplies under government programs and OMSS (1.9-2.0 MT per month vs 2.5 MMT during the first half of the MY), the government stocks on April 1, 2017 are likely to come down to 10 MMT.

Consumption Lowered

Post's MY 2016/17 consumption forecast is revised lower to 89.6 MMT, but more than 6 percent higher than last year's consumption. MY 2015/16 consumption is also revised marginally lower at 84.4 MMT based on the higher than earlier anticipated official export estimates.

MY 2016/17 Imports Unchanged

Post continues to estimate MY 2016/17 imports at 3.0 MMT after the government decision to reduce the import duty to 10 percent. Provisional official figures estimate MY 2016/17 wheat during April through August, 2016 at 263,000 MT. While the official/published figures are not available, market sources report than an additional 2 MMT has already been contracted for imports through mid-February 2017. Assuming current price parity and duty structures, MY 2016/17 are likely to reach 3.0 MMT. However, relative price movement and/or changes in the effective duty may affect the import prospects.

MY 2015/16 Exports Raised

Based on the latest GTA data, MY 2015/16 wheat exports is raised marginally higher to 1.13 MMT.

RICE

India: Commodity, Rice Milled, PSD

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

43479

43388

44500

44500

Beginning Stocks

22800

22800

17800

17800

17800

18400

Milled Production

105482

105482

104320

104320

106500

106500

Rough Production

158239

158239

156496

156496

159766

159766

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

128282

128282

122120

122120

124300

124900

MY Exports

12238

12238

10300

10300

10000

10500

TY Exports

11046

11046

10500

10500

10000

10500

Consumption and

98244

98244

94020

93420

97000

97000

Ending Stock

17800

17800

17800

18400

17300

17400

Total Distribution

128282

128282

122120

122120

124300

124900

Production Unchanged

Post estimates MY 2016/17 milled rice production at a record106.5 million metric tons (MMT) on higher planted area and normal 2016 monsoon in the major growing states. The Ministry of Agriculture (MoA) estimates rice area planted through end September 2016 at 38.9 million hectares compared to 37.9 million hectares last year on timely progress and normal 2016 monsoon precipitation. Market sources expect that total planting of kharif (fall harvested) rice during the current season is likely to be around 40.5 million hectares compared to 39.5 million hectares last year. Planting of rabi (winter planted) rice is also likely to be slightly higher than last year at 4 million hectare compared to 3.9 million hectare last year on improved availability of availability of irrigation water, particularly in south India.

Due to the timely planting and normal withdrawal of monsoon in late September, harvest of kharif rice began on schedule in the last week of September and was over by 3rd week of October in the northern rice growing states (Punjab, Haryana, Rajasthan, west Uttar Pradesh). Initial harvest reports suggest good yields compared to last year due to timely planting and availability of irrigation water in most of the rice growing states. Harvesting has started in other states during the 2nd week of October to continue through mid-December. Field sources report that the rice yields are likely to be normal in most rice growing areas except some parts in south India where prolonged dry spells during August/September affected the crop at vegetative and early reproductive growth stages.

Procurement Starts of Strong

Government procurement of MY 2016/17 rice under the minimum support price (MSP) is significantly ahead of last year suggesting bumper harvest of the upcoming rice crop. Government procurement through October 25, 2016, is estimated at 8.9 MMT compared to 6.2 MMT during the corresponding period of MY 2015/16. Most of the procurement is currently limited to the northern states of Punjab (5.9 MMT vs 4.0 MMT last year) and Haryana (2.9 MMT vs 2.2 MMT last year) and 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 2016/17 kharif rice procurement target of 33 MMT compared to MY 2015/16 kharif rice procurement of 30.9 MMT (target 30 MMT). While government is likely to procure in the northern states above the last year level, overall procurement is likely to depend on open market prices during the marketing year, particularly in southern and eastern states where procurement continues throughout the year.

Prices Steady

Domestic prices have remained relatively firm in October on the relatively higher government paddy (unmilled rice) procurement price (INR 14,700/MT compared to INR 14,100/MT for common variety). Most of the arrivals are in the northern states where the government procurement program is effective.

Prices are expected to ease in the coming weeks as the arrivals of the new crop gain pace across the country.

Stocks/Consumption Revised

MY 2015/16 ending stocks have been raised to 18.4 MT, which includes 15.9 MMT government rice stocks and 2.5 MMT stocks with private trade. MY 2015/16 consumption has been lowered to 93.4 MMT to reflect the increase in ending stocks.

Due to relatively strong procurement and weak offtake during MY 2015/16, the government-held rice stocks on October 1, 2016, were officially estimated at 15.9 MMT against the initial expectation of drawdown of government-held rice stocks due to lower production. Published information on private rice stocks is not available, but most of the private rice stocks are held by exporters. Market sources report that relatively strong government procurement and resurgence in exports since March 2016 is likely to have drawn down the stocks held by exporters. Consequently, MY 2015/16 ending stocks held by private trade is estimated lower at 2.5 MMT compared to last year's 3.6 MMT.

MY 2016/17 ending stocks have been raised marginally to 17.4 MMT (15 MMT government stocks and 2.4 MMT private stocks) to reflect the increase in opening stocks to be partially offset by forecast higher exports.

Exports Steady

India's rice export during the first eight months of CY 2016 is estimated at 7.3 MMT compared to 7.9 MMT during the corresponding period last year. Pace of exports is likely to remain steady in the last quarter of CY 2016 on expected sufficient domestic supplies and steady export demand. Market sources report strong resurgence in export demand for both Basmati rice and coarse non-Basmati rice varieties since March 2016 to the traditional markets. Consequently, CY 2016 exports are likely to reach 10.5 MMT.

Assuming no significant changes in the price parity for Indian rice in the export market and export demand, Post's MY 2016/17 rice export forecast is raised higher to 10.5 MMT.

CORN

India: Commodity, Corn, PSD

India

Nov 2014

Nov 2015

Nov 2016

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

9185

9185

8690

8690

9500

9500

Beginning Stocks

1416

1416

2179

2179

1029

1029

Production

24170

24170

21800

21800

24500

24000

MY Imports

29

29

250

250

100

100

TY Imports

21

21

250

250

100

100

TY Imp. from

0

0

0

0

0

0

Total Supply

25615

25615

24229

24229

25629

25129

MY Exports

1136

1136

550

550

700

600

TY Exports

1172

1172

550

550

700

600

Feed and Residaul

12500

12500

13050

13050

13500

13500

FSI Consumption

9800

9800

9600

9600

9800

9800

Total Consumption

22300

22300

22650

22650

23300

23300

Ending Stocks

2179

2179

1029

1029

1629

1229

Total Distribution

25615

25615

24229

24229

25629

25129

Production Lower

Post's MY 2016/17 corn production forecast is marginally lowered to 24 MMT on expected lower yields in the corn growing areas in southern states and parts of Maharashtra. Excellent rains and strong prices supported timely and record planting of corn in the major growing states. However, prolonged dry spells in August/September in major corn growing areas of Karnataka, Telangana and parts of Andhra Pradesh and Maharashtra are likely to affect yield realization due to moisture stress at the vegetative and critical reproductive (tasseling/silking/seed setting) stages. The withdrawal of the southwest monsoon and continued dry conditions in the rain fed central and southern states is likely to affect planting of the upcoming rabi corn. However, losses in these states are likely to be partially offset by favorable production prospects in other states. Consequently, Post estimates MY 2016/17 corn production at 24 MMT from 9.5 million hectares.

Prices Ease

With the expectation of an upcoming bumper harvest and continued weak demand (both exports and domestic), domestic prices have eased over the last few months.

Currently, the wholesale prices in the major producing states are ranging from INR 12,500 ($188) to 14,400 ($217) per metric ton. Market sources expect domestic prices to ease further in November after the arrivals gain pace on most producing states. Future price movements during the marketing year is likely to depend on the size of the domestic harvest and domestic demand, particularly poultry and starch sectors, as Indian corn is out priced in the international market.

Continued Weak Exports

Due to the weak international prices, Indian corn exports have staggered at low levels since March 2015, with exports limited to neighboring countries (Bangladesh, Nepal and Sri Lanka) and some containerized exports to South Asian countries.

Corn exports during the first nine months of MY 2015/16 is estimated at 390,000 MT compared to 970,000 MT during the corresponding period last year. Markets sources expect the monthly pace of exports to continue at the current levels in the last quarter of the MY 2015/16 as Indian corn remains out priced and even the traditional neighboring markets have shifted to other origins. At the current pace of exports, MY 2015/16 exports are likely to reach the estimated 550,000 MT.

Assuming no significant change in the price parity between Indian corn vis-à-vis corn from other origins, MY 2016/17 corn export is forecast at 600,000 MT.

Stocks Lower

MY 2016/17 ending stocks have been revised lower to 1.23 MMT on forecast lower production.