India to prioritise wheat exports to slash grain mountain

By Ratnajyoti Dutta

NEW DELHI (Reuters) - India will prioritise exports from overflowing government wheat stocks over private grain sales, a senior farm ministry official told Reuters, if it goes ahead with extra shipments that could face bottlenecks on railroads and at ports.

India is struggling to rein in a record stockpile of grains as another bumper harvest looms and has already approved 4.5 million tonnes of wheat exports to reduce the risk of crops rotting in the fields.

Government sources said on Tuesday that India could allow an extra 5 million tonnes of wheat exports soon -- more than doubling volumes this year to around a third of the shipments of top exporter the United States.

"Wheat exports are a priority issue as the new harvest is about to begin later in the month," said the farm ministry official, who declined to be named as he was not authorized to speak to the media.

If additional wheat shipments are approved, more Indian supplies could pile pressure on benchmark Chicago wheat prices, which last week fell to an eight-month low on a better outlook for the U.S. crop after last year's drought.

But some industry experts said wheat exports could prove difficult given congestion at ports which are already handling hefty private shipments of grains such as rice and oilmeal.

"Since India's capacity is limited whichever way they slice it is going to have a knock on effect on something else," said a Singapore-based grains trader.

Industry experts said the government would need to raise the number of ports allowed to handle grains to avoid bottlenecks, while a lengthy tendering process would also be an obstacle.

"It is nearly impossible for the government agencies to export 9.5 million tonnes wheat. Their tendering process is very time consuming. India never exported this much," said a Mumbai-based dealer with a global grains trading firm who declined to be named.

Rice and oilmeal are currently only being exported by private traders. Like wheat, the rice crop has been abundant and India became the world's biggest rice exporter in 2012.

In March, farmers in India will begin to harvest the sixth consecutive wheat crop expected to exceed demand, and when threshing is over in June the government's combined wheat and rice stocks are set to hit 100 million tonnes. That is about a fifth higher than the volume in storage a year ago.

The grain mountain is worth about $30 billion and the nation of 1.2 billion will soon have enough wheat piled up to feed its poor for a year.

(Additional reporting by Rajendra Jadhav in MUMBAI and Naveen Thukral in SINGAPORE; Writing by Siddesh Mayenkar; Editing by Ed Davies)