USDA cuts wheat estimate by 3.5% on heat damage

The US Department of Agriculture (USDA) has pared its forecast for India’s wheat output in the current crop year ending June to 79 million tonnes (mt) from 82 mt, on crop damage due to extreme hot weather just ahead of harvest.

“The initial optimism regarding the 2010 wheat crop following favourable growing conditions through mid-March was tempered by a sudden significant rise in temperature, which affected proper grain development, lowering yield prospects,” USDA’s Foreign Agricultural Service said in a recent report. It said extreme hot weather at harvest time resulted in lower-than-normal grain moisture levels, further contributing to a potential yield reduction.

Maximum temperatures in northern parts of India were 4-6 degrees Celsius above normal through most of March, which was the hottest ever in 137 years. High temperatures cause early maturation of the wheat crop and also lead to grain shrivelling that lowers yield by weight. USDA said the impact of high temperatures is likely to be more pronounced in late planted wheat in Uttar Pradesh, Bihar and parts of Punjab and Haryana, the main wheat producing states. It said though production this year is seen at record high in Madhya Pradesh, it is unlikely to offset the drop in output in the key wheat producing states of Punjab, Haryana and Uttar Pradesh — which together account for nearly two-thirds of the country’s total wheat output. USDA’s wheat output estimate is lower than the Indian government’s, which still expects it to be around last year’s record level of 80.68 mt.

In a recent interview to NewsWire18, Agriculture Secretary P K Basu had discounted concerns of a drop in output, saying according to feedback from states, wheat production would be around the same level as last year due to bumper output in Madhya Pradesh, conducive temperatures during the cropping period, and low incidence of pest attacks.

USDA said in line with lower output, the government’s wheat procurement too is likely to slip 2-3 mt below last year’s record of 25.2 mt.

“Unlike previous years, market arrivals in the major surplus wheat growing states of Punjab and Haryana have started to taper off by the third week of April,” it said. The agency said despite lower government procurement, the government’s June 1 wheat stocks are seen peaking to a record 40 mt, boosted by a record carryover of 16.1 mt from the last marketing year that ended March 31.

It said the government, however, is unlikely to lift the ban on exports to ease pressure on its overflowing granaries, amid prevailing concerns over food inflation, which has been hovering around 16-17 per cent for over two months.

It said even if exports were allowed, Indian wheat would remain uncompetitive in the global market without an export subsidy from the government. “At the current exchange rate of around Rs 44.50 for a dollar, the FOB (free on board) cost of Indian wheat would be around $310 a tonne against the US price of less than $200 a tonne and even lower for Baltic Sea origin wheat,” it said.