High price, poor quality make wheat exports unviable

Exports fall 82% in April-Dec to 550,000 tonnes

India is moving out of the world wheat market due to high price quotes and poorer quality of the grain, following reduced soil moisture on deficient monsoon rain last year.

Of the global output of 720 million tonnes (mt), major producing countries export around 150 mt. Data compiled by the government's Agricultural and Processed Food Products Export Development Authority (Apeda) showed an 82 per cent decline in Indian export at 550,000 tonnes in April–December 2015 as compared to 2.75 mt in the year-ago period. With the trend continuing in January-March, India’s export would be the lowest in four years.

The fall is significant as India is likely to face a supply glut due to record production the previous year. Despite estimates of a decline in this year’s output, the supply surplus is expected to continue, creating a storage problem in domestic warehouses.

“There are a couple of reasons for India going out of world wheat markets. Global prices have declined by 25 per cent. India’s major competitors like Europe and the Black Sea countries have seen currency depreciations,” said Ajay Sahai, chief executive officer of the Federation of Indian Export Organisations under the commerce ministry. The euro depreciated 15 per cent against the dollar during April –December. And, the central government has not allowed export from state reserves.

“The price in the domestic market is much above international prices. Unless exports are supported by some incentives, shipment would be difficult,” said Sahai.

Our record export was in 2012-13, of 6.51 mt worth $1.9 billion, when price quotes from India were below the level in the world market. “We are completely outpriced in the market today. Unless our price declines or world price moves up, export would not move up,” an Apeda official said. Data compiled by Bloomberg shows the price in America is $183.17 a tonne as compared to $242.91 a tonne from India.

A recent report by the Food and Agricultural Organization claims wheat prices are less than half the $280 a tonne of November 2014.

In India, the agriculture ministry set a production target of 93.38 mt for 2015-16. Output declined to 88.94 mt the previous year, from 95.85 mt in 2013-14.

Vimal Sethi, proprietor of Pooja Trading Corporation, a wheat exporter based in Amritsar (Punjab), blamed subdued quality as a major reason for the fall. “Because of deficient monsoon rain last year, wheat plants did not get adequate soil moisture, resulting in the grain quality that was inferior to the global standard,” he said.

In India, the ministry of agriculture set a production target at 93.38 t for 2015-16. Output declined to 88.94 mt the previous year, from 95.85 mt in 2013-14.