Bloomberg News

Cold Weather to Boost India Wheat to Record for Seventh Year

January 09, 2013

Wheat output in India, the world’s second-biggest producer, may reach a record for a seventh year as cold weather boosts yield prospects and record domestic prices spur planting, potentially boosting exports. Futures in India fell for a seventh day.

Better soil moisture and below-average temperatures in the main growing states of Punjab and Haryana in the past three weeks have been beneficial for the crop, said Indu Sharma, director at the state-owned Directorate of Wheat Research. The harvest starting from April may climb from an all-time high of 93.9 million metric tons in 2011-2012, she said.

A bigger harvest may force the government to pare stockpiles through exports and vacate warehouses for the new crop, pressuring futures in Chicago which fell to a six-month low last week. Rising supplies from India may help partly make up for the potential crop losses from the U.S. to Argentina and Australia to dry weather and cap global food costs tracked by the United Nations’ Food & Agriculture Organization.

“With elections scheduled for next year, the government will like to buy more of the new crop,” said Faiyaz Hudani, a senior analyst at Mumbai-based Kotak Commodity Services Ltd. “It will have to liquidate the old crop to create space. When the purchase is going to be high, the government’s only option is to export.”

Australia, Argentina

India may find it easier to export after drought reduced wheat output in Australia and Argentina, while Russia and China were set for smaller crops, Hudani said. The country may ship more than 5 million tons in the year from April, he said. Exports have surged to 5.2 million tons, including 1.23 million tons from state stockpiles, since a ban on sales was scrapped in September 2011, according to data from India’s food ministry.

Global production may drop 5.9 percent to 655.11 million tons in the year ending May 31, according to the U.S. Department of Agriculture. Inventories are declining for a third year and seen at the lowest level relative to consumption since 2008, when wheat prices surged to a record $13.495 a bushel. Futures advanced 19 percent to $7.78 in 2012 on the Chicago Board of Trade, having risen as high as $9.4725 in July.

Prices in India jumped 29 percent last year after exports rose and the government increased the minimum price paid to farmers to a record. The contract for delivery in February closed 0.5 percent lower at 1,495 rupees ($27) per 100 kilograms on the National Commodity & Derivatives Exchange Ltd. in Mumbai today. The contract for delivery in March traded 0.2 percent higher at $7.5175 a bushel in Chicago.

Crop Development

Farmers planted wheat in 28.6 million hectares (70.7 million acres) as of Jan. 4 compared with 28.2 million hectares a year earlier, according to the farm ministry. Weather is set to remain favorable for crop development in the coming weeks, said L.S. Rathore, director general of the India Meteorological Department.

“The wheat crop is likely to be good this year,” Rathore said in an interview. “There is no signal of abnormal weather prevailing until March. If the area goes up, the output will increase.”

The crop is in good conditions in the main producing states of Punjab, Haryana and western parts of Uttar Pradesh, according to the wheat directorate’s Sharma. The climate during the grain formation stage from the second half of February will be key to boosting yields, she said.

State inventories of wheat totaled 34.4 million tons as of Jan. 1, more than the minimum 11.2 million tons required to be held for emergencies and strategic reserves, according to the Food Corp. of India. The government bought 38.1 million tons of wheat from farmers in 2012-2013.

To contact the reporter on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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