Highlights

On May 19, 2017, the Ministry of Agriculture (MOA) raised the third advance estimate for grains production for the Indian Crop Year 2016/17 (July-June) further to a record 273.4 million metric tons (MMT). MY 2017/18 wheat production is estimated marginally lower at 96 MMT (record) on the latest official planting estimate. MY 2016/17 rice production estimate is raised higher to a record 108 MMT on expected record yields. Based on the current pace of monthly exports, Post’s MT 2016/17 rice export is estimated higher at 11 MMT.

The Ministry of Agriculture Raises Forecast of Record Food Grain Production

On May 19, 2017, the Ministry of Agriculture (MOA) released its Third Advance Estimates of Production of Food Grains for the Indian Crop Year 2016/17 (July-June), raising grain production further to a record 273.4 million metric tons (MMT) compared to 271.9 MMT estimated in the Second Advance Estimate released on February 15, 2017. The forecast production is a whopping 21.8 MMT higher than last year’s weak monsoon-affected harvest, and about 8.3 MMT higher than the previous record of 265.04 MMT in ICY 2013/14. The Ministry of Agriculture attributes the forecast record grain production to record planting, ‘good’ 2016 monsoon, and various policy initiatives taken by the government.

The MOA’s ICY 2016 grain production estimate includes MY 2016/17 rice, coarse grains, and pulse crops harvested last fall (kharif crop) and this spring (rabi crop), as well as the MY 2017/18 wheat and barley (rabi crop) harvested in March-May 2017. The record 2016/17 grain production estimate includes record production of:

• rice at 109.2 MMT (vs. 106.7 MMT in 2013-14) on expected record yields (2.54 MT/hec vs previous record of 2.46 MT/hec in 2012/13)

• wheat at 97.4 MMT (vs. 95.9 MMT in 2013-14) on near record planting and yields

• corn at 26.1 MMT (vs. 24.3 MMT in 2013-14) on record planting (9.76 million hectares) and near record yields

• pulses at 22.4 MMT (vs. previous record 19.3 MMT in 2013-14) on record planting (29.3 million hectares vs 26.4 million hectares in 2010/11).

The government’s third advance estimate is over-optimistic as the overall weather condition during the current season has not been as favorable as observed during the previous record grain production season of ICY 2013/14. While the 2016 monsoon was normal for the country, some parts of north and south India received below normal rains, and the northeast monsoon which provides rainfall to the southern states (October to December) was relatively weak. The temperatures during the early part of the winter season (November/December) had been above-normal, which affected soil moisture conditions for the winter planted rabi crops. Consequently, the weather conditions during the ICY 2016/17 have been less than ideal compared to the previous record food grain production year 2013/14.

The third advance estimates are based on three things: the provisional acreage estimates for both kharif and rabi crops; provisional yield estimates for the kharif crops based on the crop cutting survey reports from major states; and crop condition survey reports conducted before the harvest of the rabi crops.

The MOA will further revise the ICY 2015/16 estimate in August (fourth advance estimate) based on the revised data from various state governments on acreage and yields (based on crop cutting experiments) for both kharif and rabi crops. The ICY 2016/17 estimates are likely to be finalized in February 2018.

WHEAT

Wheat

2015/2016

2016/2017

2017/2018

Market

Apr 2015

Apr 2016

Apr 2016

India

USDA

Official

New Post

USDA

Official

New Post

USDA

Official

New Post

Area Harvested

31470

31470

30220

30418

31750

30715

Beginning Stocks

17220

17220

14540

14540

9640

9640

Production

86530

86530

87000

87000

97000

96000

MY Imports

471

471

6000

6000

4000

4000

TY Imports

300

300

6000

6000

4000

4000

TY Imp.from US

0

0

0

0

0

0

Total Supply

104221

104221

107540

107540

110640

109640

MY Exports

1130

1130

400

400

500

500

TY Exports

873

873

400

400

500

500

Feed and

4200

4200

4700

4700

5000

5000

Residual FSI

84351

84351

92800

92800

95000

94000

Total Consumption

88551

88551

97500

97500

100000

99000

Ending Stocks

14540

14540

9640

9640

10140

10140

Total Distribution

104221

104221

107540

107540

110640

109640

Yield

2.7496

2.7496

2.8789

2.8601

3.0551

3.1255

Production

Post estimates MY 2017/18 wheat production marginally lower at 96 MMT on lower than earlier reported official planting estimate of 30.7 million hectares in the third advance estimate. Due to the timely onset of the spring season and absence of late season rains (March/April), wheat was harvested at ideal times in most states starting late March in Madhya Pradesh/Rajasthan and was over in most states by early May. The yields in most of the growing states are higher than normal (five year average) but lower than the record yield in MY 2012/13 due to early temperature stress (November/December). Most industry sources estimate the crop harvest to be in the range between 92 to 96 MMT, compared with the government’s third advance estimate of 97.4 MMT on ‘over-optimistic’ yield expectation (3.17 MT/hectare). Post estimates MY 2016/17 wheat production at a record 96 MMT from a record 30.7 million hectares with an expected yield realization of 3.13 MT/hectare.

Market arrivals are likely to be over in most states by first week of June, but will continue through early July in Uttar Pradesh, Madhya Pradesh and Bihar. However, market arrivals of wheat held by farmers and local traders for late season sale will continue through the year in most states except Punjab and Haryana, where most of the locally produced wheat is procured by the government. The farmers and local traders are likely to hold larger than normal quantities of wheat on expectation of higher late season prices than was experienced during the last marketing season.

Strong Procurement

The government wheat procurement has been strong during the current season suggesting bumper harvest. Total government procurement of wheat through May 24, 2017, is estimated at 29.1 MMT compared to 22.8 MMT last year during the corresponding period

Wheat procurement in the major surplus states has been significantly higher than in the last two years. Procurement in Punjab and Haryana will be over by late May as farmers bring their produce immediately after harvest (first week of May); high local taxes preclude any significant private purchases. Procurement is likely to continue in other states through June on harvest of late season wheat; also, farmers tend to stagger post-harvest sales as private trade competes with the government procurement. While procurement will officially continue through June, volumes are likely to taper off in most states in the next two weeks. Market sources expect MY 2017/18 wheat procurement to be around 31 MMT compared with the central government’s procurement target of 33 MMT.

Domestic prices have been hovering around the government’s MSP in most producing states due to the ongoing government procurement operation. The local wheat prices in major wheat surplus states currently range from INR 16,040 ($248) to INR 16,810 ($260) per metric ton, around the government’s MSP of INR 16,250 ($252 per metric ton).

Market prices are likely to remain steady in June on the ongoing government procurement program. Future price movement will largely depend on the government import duty policy and international price movements.

Consumption

MY 2017/18 consumption estimate has been revised lower to 99 MMT (FSI consumption 94 MMT and Feed & Residual 5 MMT) to account for the forecast lower production, a more modest increase of 1.5 percent over last year.

RICE

Rice, Milled

2015/2016

2016/2017

2017/2018

Market Begin Year

India

Oct 2015

Oct 2016

Oct 2016

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

43499

43499

44500

42950

44500

44000

Beginning Stocks

17800

17800

18400

18400

18900

18900

Milled Production

104408

104408

106500

108000

106000

106000

Rough Production

156628

156628

159766

162016

159016

159016

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

122208

122208

124900

126400

124900

124900

MY Exports

10240

10240

10000

11000

10000

10000

TY Exports

10040

10040

10000

11000

10000

10000

Consumption & Residual

93568

93568

96000

96500

97500

97500

Ending Stocks

18400

18400

18900

18900

17400

17400

Total Distribution

122208

122208

124900

126400

124900

124900

Yield (Rough)

3.6007

3.6007

3.5902

3.7722

3.5734

3.614

Post’s MY 2016/17 rice production estimate is raised higher to a record 108 MMT on higher than initially expected production of kharif (fall harvested) rice based on the provisional yield estimates reported in the government’s third advance estimate. MY 2016/17 area is revised lower to 42.9 million hectares based on the revised official estimates from the Ministry of Agriculture. Consequently, MY 2016/17 rice yields are estimated at a record 2.51 MT per hectare (3.79 MT/hectare rough rice) compared to the previous record of 2.46 MT/hectare (3.69 MT/hectare rough rice) in MY 2012/13. The normal 2016 monsoon supported timely planting, lower incidence of pest and diseases, and relatively lower harvest losses due to untimely rains at the time of harvest. The relatively higher share of high yielding non-Basmati rice compared to the long grain Basmati rice supported higher rice production in the north Indian states (Punjab, Haryana and Uttar Pradesh). Timely withdrawal of the 2016 monsoon and absence of floods and cyclonic storms during harvest (October/November 2016) supported higher production in eastern and coastal India. Provisional harvest reports from the state governments suggest higher kharif rice yields than earlier anticipated in these regions. Consequently, Post estimate MY 2016/17 rice production at 108 MMT (95 MMT kharif rice and 13 MMT rabi (spring harvested) rice) from 42.9 million hectares.

Heading for Record Government Procurement

Riding on expected record harvest, government rice procurement has already surpassed the previous record 36 MMT in MY 2009/10. Government rice procurement through May 24, 2017, is estimated at 36.9 MMT compared to 32.6 MMT during the corresponding period last year. With additional procurement of rabi and summer rice likely to continue in eastern and southern states (slightly lower than last year), government rice procurement in MY 2016/17 is likely to touch record 38 MMT, about 4 MMT higher than last year and 2 MMT higher than the previous record.

MY Exports Raised

Indian rice exports have been very strong since the beginning of CY 2017 on relatively strong demand for non-Basmati rice, mainly from African countries and neighboring Bangladesh. Based on the current pace of monthly exports, Post’s MT 2016/17 rice exports is estimated higher at 11 MMT on forecast domestic supplies and strong export demand, assuming no significant change in the price parity of India rice vis-à-vis rice of other origins.

Rice exports from October 2016 to March 2017 were estimated at 5.2 MMT compared to 4.8 MMT for the corresponding period last year, largely on strong resurgence in the demand for both Basmati and non-Basmati rice since December 2016. Assuming no significant changes in the price parity for Indian rice during the remaining marketing year, MY 2016/17 exports are likely to reach 11 MMT compared to 10.2 MMT in the previous year. However, any change in the import policy of the major destination country or in the value of Indian rupee against the US dollar may affect the export prospects in the second half of the marketing year. MY 2017/18 rice exports are forecast at 10 MMT on sufficient domestic supplies, assuming continued export demand and international price parity for Indian rice.