by Raj Kapoor, director, ASSOCOM-INDIA via US Wheat Associates newsletter

Indian wheat production in recent years hovers around 72 to 74 million metric tons (MMT), but hit a peak of 75 million metric tons in 2003/04. Wheat production for 2004-05 is estimated to be lower at 72 MMT, against projected estimates of 74.04 MMT, almost the same as last year's production of 72.43 MT.

Private players are estimating that the country will need to import at least 2-3 MMT of wheat during the current fiscal year to meet a shortfall in wheat stocks for running the public distribution system and welfare schemes. At the same time, the government is hesitating to give any such statement.

The recent concerns in India over high wheat prices and dwindling stocks are primarily due to lower procurement by the government and should not be linked to output during the current crop year ending June. This season, private players have been very active in the market and purchased huge quantities of wheat. (Private players, including multinationals Cargill and Australian Wheat Board, are estimated to have purchased around 4-5 MMT of wheat.) These purchases and holding back of stocks are driving up prices.

The annual growth rate in wheat production has dropped from a healthy 3.57 percent in the 1980s to 2.11 percent in the 1990s and below 1 percent in the current decade. Wheat, being a non-monsoon dependent, winter season cereal, is critical for the country’s food security and any deceleration in its production growth is unwarranted. Wheat output needs to grow annually by at least 2.5 percent to keep pace with the rise in demand.

Total food grain production estimate is 8.85 MMT lower than the previous year's (2003-04) output of 213.46 MMT; the target has been missed by 20.49 MMT. The estimated 204.61 MMT is accounted for by 103.32 MMT Kharif food grains and 101.29 MMT Rabi food grains (including wheat). While the Kharif estimates are marginally lower (0.76 MMT lower than the third advanced estimates of 104.08 MT), Rabi production is estimated to be about 5 MMT lower than the third advanced estimates of 106.36 MMT. [Editor's note: There are two major cropping seasons in India, namely, Kharif and Rabi. The Kharif season is during the south-west monsoon (July-October). During this season, agricultural activities take place both in rain-fed areas and irrigated areas. The Rabi season is during the winter months, when agricultural activities take place only in the irrigated areas.]

The overall food grain stocks -- driven by low wheat stocks in the Central pool -- have declined below the minimum buffer norms by about 2.5 MMT as of July 1. The Government plans to make good the low wheat stocks by offering rice instead of wheat for the Food-for-Work programs in the Northeast and Kerala. As of July 1, there was an estimated stock of 24.5 MMT of food grains in the Central Pool, comprised of 14.5 MMT of wheat and 10 MMT of rice. The buffer norms set by the Government for July 1 requires 26.9 MMT of food grains (9.8 MMT of rice and 17.8 MMT of wheat). The Indian government had revised its buffer norms upwards in March this year before which it was at 24.3 MMT for July 1 (constituting of 10 MMT rice and 14.3 MMT wheat). The government had revised the buffer norms upwards anticipating additional demand for the Food-for-Work programs.

The monsoon, which turned negative during June 2005, is now on excess phase. However, some sowing of some oilseed crops have been affected due to delay in monsoon, but it looks positive for wheat sowing in October 2005.

Interestingly, the Government of India has cleared a long awaited proposal for building silos for Food Corporation India (FCI) after almost 10 years. Ahmedabad-based Adani Group has bagged the mandate to construct bulk silos for storing and handling grain for the FCI. The project involves creation of 1.8 MMT of grain storage and handling capacity by the private sector on a build, own and operate basis.