India wheat crop reaching 100 mt widens global glut

Wheat production in India, the world's second-largest grower, will probably climb to a record, as all-time high domestic prices boost planting, adding to global grain surpluses.

The harvest could total 100 million tonnes (mt) in the marketing year starting April 1, Agriculture Commissioner J S Sandhu said on Thursday. Output had fallen 2.5 per cent to 92.5 mt a year earlier from a record 95 mt in 2011-2012, according to the agriculture ministry.

Crop prices from wheat and corn to canola are slumping as record harvests from the US to Brazil expand global grain inventories. The Standard & Poor's GSCI Index of eight crops fell to the lowest since July 2010 on Wednesday, extending its biggest annual drop since 1981. Record output might force India to accelerate exports from state reserves to make room for the new crop, extending a decline in global food costs tracked by the United Nations.

"Exports will pressure global prices," said Vedika Narvekar, chief manager at Mumbai-based Angel Commodities Broking. "Exports will largely depend on the crop in the US and Russia. Domestic prices will be stable."

Wheat futures tumbled 22 per cent in 2013, as world production climbed 8.4 per cent to a record 711.4 mt versus consumption of 699 mt, according to the US Department of Agriculture (USDA). Futures fell to $5.8675 a bushel on Wednesday, the cheapest since December 2011, and were at $5.8825 in Chicago on Thursday.

'Exports difficult'
Prices in India rallied to an all-time high on December 27, after the government increased the minimum price for farmers to a record. The February delivery contract fell one per cent to Rs 1,640 ($26.4) a quintal on the National Commodity & Derivatives Exchange in Mumbai on Thursday.

"The international market is not very promising for at least six months," said Abdolreza Abbassian, a senior economist at the UN's Food & Agriculture Organization. "If India's output increases, as it looks, global prices will fall below local prices, making exports difficult."

Area for wheat in India may reach a record of 31 million hectares this year, said Sandhu. Sowing increased 5.6 per cent to 30 million hectares as of Janu-ary 3, compared with 28.6 million a year ago, according to the ministry. The average yield of wheat in India is three tonnes a hectare and the crop is planted from October and harvested in April and May.

Monsoon, winter
"The crop will get the benefit from a normal winter predicted," said K K Singh, head of Agromet division at India Meteorological Department. "More than average monsoon rains and its late withdrawal provided adequate moisture."

State stockpiles totalled 31 mt on December 1, compared with 37.7 mt a year ago, according to the Food Corp of India. The government raised the minimum price paid to growers to an all-time high of Rs 1,400 a quintal for the 2013-2014 crop. The government purchases rice, wheat and oilseeds from farmers at guaranteed prices and sell these to the poor at subsidised rates through state-run shops, to prevent distress sales in the open market.

Wheat shipments from India could drop five per cent to 6.5 mt in 2013-2014, according to the USDA. Exports totalled 2.8 mt between April 1 and December 13, according to ministry estimates.