Possibility of India importing wheat firming up: trade sources

There is a growing possibility that India, the third-biggest producer of wheat in the world, will start to import wheat to combat the expected effect of the El Nino weather pattern on the crop while stocks are currently low, according to trade sources.

Lower production and the need to boost stocks could prompt the Indian government to buy at least 34 million mt of wheat, trade sources suggested at during the 8th Fastmarkets Global Grain and Animal Feed Asia event in Singapore. They pegged consumption at around 104 million mt.

Some trade sources had mentioned earlier in 2023 the likelihood of India becoming an importer in the 2023/24 marketing year, citing a surge in local wheat prices, a government need to regulate the market and official stocks standing at low levels.

But the release of 3 million mt of governmental stocks to the market provided some succour, with estimates of the local price of wheat at around $266-270/mt - a fall of up to $134/mt since mid-January and only slightly higher than the minimum support price (MSP) paid by the government of $257.30/mt.

Despite the easing in the domestic price over the past six weeks, state stocks remain low and, unlike in January when estimates for the forthcoming crop were at record levels, the weather has been drier than expected.

Crop projections might drop as a result - the official estimate for the wheat crop is at 112 million mt, while last year, prior to the March forecast, it was at a record 110 million mt but subsequently dropped below 100 million mt due to a heatwave during March.

This year, there is a probability of a heatwaves across the country between March and May, the Indian Meteorological Department said February 28, while February was reportedly the hottest on record.

If stocks remain low and prices high, the government will most probably import via tenders but it might look to private deals or freer imports if prices fall, Garima Jain, deputy CEO of Louis Dreyfus India, said at the Fastmarkets event.

State-to-state deals are possible later in the year but only if the government fails to secure enough wheat through other means, Gaurav Jain of AgPulse Analytica said.

The import tax on private trade remains at 40% apart from the wheat ban imposed on March 13, 2022.

Ove the longer term, India will neither be a consistent exporter nor a consistent importer but will change position depending on prevailing dynamics, Garima Jain suggested.

"I think India will become a swing factor for the world markets," she said.