India's Wheat Exports Limited by High Domestic Prices

India wheat exports down in fiscal year

In the midst of high local prices, projections are it will limit India's wheat and wheat product exports in the fiscal year ending March 2010, although the country has eased an earlier ban on exports this month to allow limited shipments.

On July 3, the federal government allowed three state-run firms - MMTC, STC and PEC - to export 300,000 tons each of wheat by March 31, 2010. In addition, private companies were allowed to export another 650,000 tons in wheat products, also by the same date.

But that is unlikely to lead to a surge exports.

"International prices are around $195 to $198/ton and Indian wheat costs around $232/ton," said Veena Sharma, secretary of Roller Flour Millers Federation (RFMF) of India.

She said exports are feasible only if international prices rise in the coming months.

"Unless there is a government subsidy of $30-$40/ton, (wheat exports are) not feasible," said Ajay Goyal, president of Maharashtra Roller Flour Millers Association (MRFMA).

However, the formal government order allowing the exports made it clear that "no subsidy will be given" to exporters.

India's federal government had imposed a ban on exports of wheat and wheat products in December 2007 to help curb inflation.

Since then, domestic wheat stocks have reached comfortable levels following two bumper crops and on carryover stocks from previous imports.

Even if some exports take place now, those could mainly be to neighboring countries, traders said.

"We may have to look to export to countries like Bangladesh, Nepal, Bhutan and Maldives to save on freight costs," said a state-run trading firm official, who did not want to be identified.

However, industry officials ruled out the possibility of wheat exports to Pakistan because there is no supply shortage there.

Meanwhile, state procurement of wheat has been on the rise following higher support prices.

Farmers sold more wheat to government agencies, rather than to private companies, as the state-fixed price of 10,800 rupees ($223)/ton was attractive, and relatively higher than even global prices, traders said.

Latest government data showed local wheat purchases by government agencies have already touched a record 25.06 million tons since purchases started in April, and more was trickling into state granaries.

In its annual budget announcement Monday, the government said it would step up subsidized sale of grains to poor consumers in the coming months.

With the chance of wheat exports looking slim, industry officials were more hopeful about exports of wheat products such as flour and semolina.

"Although there is not so much of demand for wheat products in the global market now, there could be some demand coming from the Middle East," said A N Gupta, chairman of Wheat Products Promotion Society of India.

He said demand for value-added wheat products from India is likely to be much more than the demand for the grain itself in global markets.

India wheat exports down in fiscal year

Wheat Growers Facing Tough Cost-Control Challenges in 2009

The end of the huge profits for wheat producers may come to an end next year as skyrocketing prices of inputs, in the face of flattening prices, will challenge producers to manage their costs more efficiently than ever.

Prices of almost everything have increased significantly, including fuel, fertilizer, machinery, labor, crop insurance and seed. A number of these inputs have surged by almost 20 percent over the last year. If producers want to add land to the mix, prices have also increased by 19 percent over the last 12 months as well.

As of 2004, breakeven for wheat was around $4 a bushel, in 2009 it's projected to reach over $6.85 a bushel.

Who would have thought that the idea of $7.00 wheat would have profitability challenges, but in 2009 that's a distinct possibility and probability.

How and when producers buy and at what discount may be the difference between profits and losses next year.

Go here for costs and revenue of irrigated and dryland winter wheat over the last ten years, included the projections for 2009.