Trade casts doubt on India's ambitious wheat crop forecasts

India-based trade sources have reacted coolly to news that the country is on track to produce a third consecutive record wheat harvest, after the government published its latest production outlook late Wednesday. 

India’s agriculture ministry published a 109.24 million mt production outlook for the wheat crop, up around 1% versus last year’s figure and some 2 million mt above the USDA’s estimation, although traders see a less optimistic outlook.

Broadly the trade is looking for an Indian wheat crop in a 100-104 million mt range, but even that is far from guaranteed as the harvest doesn’t start until March, and so is still vulnerable to rain and consequent pests or disease.

“In some areas there's yellow rust attack,” Aman Swaroop, an analyst from Agriwatch told Agricensus.

“We don't have adequate preparation in the market and most of the time wheat gets wet in rain... And till now the crop is still standing so it depends on weather also,” Swaroop said.

Even so, the country’s output will still be more than enough for its own domestic usage, teeing up a potential export boon - although that will depend on worldwide prices.

Usually the government buys wheat from the market at a minimum supporting price (MSP), which currently stands at around $287/mt for 11.5% according to sources in the country.

Against that MSP, farmers will only look to the export market if world prices look more attractive, and at current levels the country’s wheat production looks competitive.

Given current FOB levels in alternative origins and strong freight rates, Indian wheat is competitive for nearby countries like Bangladesh, Sri Lanka, and some Middle East countries and is likely to remain so at least until the northern hemisphere’s new crop wheat becomes available.

Even so, with Russia implementing a new quota and export tax regime on its exports, there could be an opportunity to cater for regional demand from Asia’s importers - many of whom are said to have delayed forward purchasing of supply as they wait for greater clarity.