The Hindu Business Line : India exploring wheat import options

Mumbai, Jan. 30 The global commodity markets are currently in a state of uncertainty. Prices remain volatile and outlook has turned increasingly uncertain in the backdrop of broader market concerns, especially in financial and energy markets. The global grains market is no exception. Wheat and soyabean prices spiked recently on the futures bourses to set new records. Corn (maize) too is tightening.

Investors are increasingly turning to agricultural commodities. The next 2-3 months are crucial. From now on, the focus of the global grains market participants would increasingly be on developments in the US. How the US farmers would respond to price changes in recent months, what would be their planting intentions and what considerations would weigh with them for any change in acreage allocation (including weather and disease outlook) are questions that would be pondered over.

The focus would also be on the northern hemisphere as a whole, with outcomes of crops in China and India being keenly watched. As far as the US is concerned, if the extent of price rally is the basis of decision by the farmers there, then wheat stands the best chance of an area expansion, followed by soyabean. Corn would be third in priority as its prices rallied less than the other two.

Volatility hook

However, until acreage numbers crystallise, the market would only be double-guessing the actual outcome. Therefore, a lot more choppy trading and volatility can be expected. According to the London-based International Grains Council (IGC), on current reckoning, the 2008 outlook for wheat is generally positive. Assuming reasonable weather in main producing areas, world wheat output is forecast to rebound by about 40 million tonnes (mt) to a record 642 mt.

There is also strong expectation that soyabean production in 2008 would rebound by at least 10 per cent, especially in the US, from the previous year’s low of 70 mt (down 16 mt from 2006). Should that expectation materialize, and if combined with large oilseeds crop in China and India, the outcome will have price implications for the global vegetable oil market, notwithstanding the frenzy created by the bio-diesel sector.

scouting for wheat

Meanwhile, there are reports about Indian wheat acreage having reached close to last year’s levels (27 million hectares). Official statements suggest expectation of crop size close to 2007 level of 75 mt. There are also reported statements that India would not need to import any more wheat.

Despite the brave assertions, it is believed that India is seriously scouting for wheat in the global market. The Government may be unwilling to take a chance as far as availability and prices are concerned, especially when elections are looming large.

Explorations are going on rather quietly because of the ruckus the last import contract created. The Government is currently engaged in examining various options. A barter deal with Russia is being studied. Exercising the ‘call option’ is another step that is under contemplation, although the last time it fizzled out.

Discussions with US

Importantly, discussions with even the US are currently on for wheat imports. It maybe recalled, the US could not supply to India because the latter refused to loosen the strict phyto-sanitary requirements. Meanwhile, the domestic trade has other ideas about the crop size.

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