Trade on alert over India wheat exports despite government promise

Government efforts to calm fears over the availability of Indian wheat exports have failed to quell rumours around the country’s production, as fears mount that extreme heat could slash production outlooks.

Traders have feared that the government could impose restrictions on Indian wheat exports, prompting Indian government officials to state that there was no plan to curb exports, and that India would continue to develop its export potential, including improving its phytosanitary and quality checks.

That comes despite a reduction in the country's production forecast, which has dropped significantly amid ongoing heat.

The government has already decreased its output estimate by 6 million mt to 105 million mt, while some local analysts still hold out hopes that production will still reach up to 107 million mt.

However, the bulk of traders say they are expecting production to dip to somewhere between the 94.5 million-102 million mt range.

Most of trade sources agree that there will be a drop in output compared to last year, the question now is simply, how much? 

“The drop is more important to know and that is likely to be 6-7 million mt down versus last year,” a trader said.

In addition to that, Indian wheat stocks are currently at their lowest level in years amid high global demand for wheat and the emergence of India as a potential origin over the last eighteen months.

That has fuelled a sharp increase in exports and seen the country strike important deals with major importers like Indonesia, Egypt and Vietnam.

While the USDA’s India ending stock forecast currently remains at 21 million mt - with the USDA likely to update figures in the upcoming May review of its influential Wasde report - local analyst Gaurav Jain from AgPulse Analytica has cut their estimate to 18.9 million mt.

Domestic consumption is not expected to increase amid the high price of wheat, especially compared to rice, while some expect demand to drop compared with last year.

“For the years between the 2013/14 marketing year and 2019/20, Indian wheat consumption averaged 94 million mt and remained stable. With prices significantly higher this year, we expect Indian wheat consumption to reduce to 102 million mt,” Jain told Agricensus.

“We will not be surprised to see it drop below 96 million mt, if the prices remain elevated,” Jain said.

Meanwhile, local state procurement remains at a slow pace with around 17 million mt of wheat bought by the government by April 30, compared with 28 million mt at the same date of 2021.

The slowdown in procurement comes as the price that exporters are prepared to pay is higher compared to the government's minimum support price (MSP) scheme.

For the first month of the 2022/23 marketing year, India has already broken its export record according to Agricensus analysis – with available lineup data showing that already up to 1.8 million mt of wheat has been exported in April compared to just 227,810 mt in the same month of 2021.

That is also significantly up compared to the average monthly loading from India during the last half of the year.

That fast is not lost on trade observers, and is one of the factors that could yet push the government to control the export pace in order to guarantee internal food sufficiency.

However, traders do not expect there to be an outright export ban, with the country more likely to impose either a sliding export tax or a quota.

Meanwhile, while some estimates for India’s 2022/23 export slate reach as high as 15 million mt, trade sources are more pessimistic, expecting the levels to reach around 8-12 million mt range.

However, that would still be an increase versus the 7 million mt exported in the 2021/22 marketing year.