India’s wheat exports wilt due to high prices

Higher global supplies and lower demand have pushed international prices down in the recent months, which has adversely affected India’s wheat exports The Dollar Business Bureau

Wheat is the most traded agricultural commodity and accounts for around 50% of annual global cereal trade

Contrary to earlier estimates that India’s wheat exports may reach a record high this year, high domestic prices and improved crop prospects in wheat producing nations are likely to lead to a sharp decline in India’s wheat exports. USDA says in its latest report that India’s wheat exports are expected to plunge to around 3 million tonnes in FY2014-15, which is almost half of what the country exported in the previous year. According to USDA, India exported around 6.8 million tonnes of wheat in FY2012-13 which declined to around 5.8 million tonnes in FY2013-14. However, FY2014-15 could be worse for wheat exporters. India is a top wheat producer but over 90% of the total production is consumed locally. Wheat prices are also dependent on the minimum support price (MSP) that the government offers to farmers for its public distribution system (PDS). Earlier this year, Indian wheat exporters had hoped that domestic prices will fall below the MSP of around $237 per tonne and also below international prices due to higher domestic production and crisis in Ukraine. However, after contracts in the initial months of FY2014-15 (around 2.5 million tonnes in April-October 2014), wheat exports have slowed down. While India’s wheat production is expected to increase to around 95.9 million tonnes in FY2014-15, up about 2.5% from the previous year, international prices have declined around 3% m/m to around $280 per tonne in November 2014, which is also down around 12% from year ago levels. According to the World Bank, wheat prices have declined 18.5% y/y in Q3 2014 and are expected to remain low in the coming years. Meanwhile, high domestic prices (of around $284 per tonne) in India are likely to continue in the coming months and India’s wheat exports will largely be limited to neighbouring countries, according to USDA. Wheat exporters in India say that the PDS system and high input costs put India at a disadvantage when compared to top exporters such as USA and Ukraine.

This article was published on December 16, 2014.

Related Topics:

The Dollar Business Bureau - Dec 16, 2014 11:07 IST

India’s wheat exports wilt due to high prices

We like you just the way you are.