Exporters see margin boost

Welcome govt’s move to lift ban on rice & wheat exports.

Albeit late, the government's decision to allow unhindered export of wheat and rice has raised hopes among exporters about earning reasonable margins in international markets, as the price situation has turned back in India's favour.

The official notification, issued on Friday, has allowed unrestricted export of these grains, but food minister K V Thomas said anything beyond two million tonnes each of wheat and rice would not be permitted.

Though the best time to export wheat would have been March, when the global market was facing an acute shortage, traders feel there is still good opportunity to earn, as Indian wheat is much cheaper than that of its competitors. It stands a good chance of being exported to its traditional destinations like Southeast Asia and West Asia, as it will be cheaper than Russian and Australian wheat, its two nearest competitors.

Traders said the Russian Black Sea wheat was being quoted at $310 per tonne (carriage and freight inclusive) in West Asian countries, while Australian wheat is being sold at $350 per tonne in Southeast Asia. In both areas, Indian wheat would be priced at $310-315 per tonne.

“On the whole, we feel that though we might have missed the bus in March, all is not lost,” a senior trader working in an international grain trading firm said. At the time, Black Sea wheat had not even come.

In the case of rice, traders feel India’s could be around $75 per tonne cheaper than its nearest competitors from Southeast Asia such as Bangladesh and Pakistan. In the international markets, the benchmark Thailand 100 per cent B-grade white rice was quoted at $640 per tonne on Thursday, the highest since October 2008.

The government had announced allowing exports of up to two million tonnes of wheat and an equal quantity of non-Basmati rice under open general license (OGL). The ban was imposed in 2007 as the domestic price of grain rose because of low procurement by state-run agencies.

In July, the government had allowed export of a million tonnes of non-Basmati rice, but no shipment could take place, as the matter got into a legal tangle. Putting export under OGL would mean the complications that arose in July would not happen this time.

Time and again, there has been a demand from various circles to lift the ban, especially after procurement of wheat and rice started reaching record levels, but the government has been wary of doing so, as it could have pushed up prices in domestic markets. Exports were also held up as the Centre was in the process of finalising the numbers for grain requirement under the proposed Food Security Act, expected to be operationalised from the next financial year.

However, the government was pushed to re-think its decision as bulging grain stocks in state-run warehouses led to prices falling below the minimum support price in many places.

“The price of wheat in areas like Rajasthan, Gujarat and Uttar Pradesh dropped below the government fixed MSP (minimum support price) of Rs 1,120 per quintal, while stocks are overflowing. Hence, there was an urgent need to allow some export to ease the surplus,” a senior food ministry official said.

As on August 1, wheat stocks in government warehouses were 35.87 million tonnes, substantially higher than the target of 17.1 mt set for July-September. Rice stocks during the same period were estimated to be around 25.7 mt, against the requirement of 9.8 mt.