Wheat export push under cloud as procurement drops by over 35% till Apr 24

Production too is estimated to be lower than the earlier projection of 111 million tonnes

India may have to reconsider its decision to push wheat exports in a big way once the threshold of 6-7 million tonnes is breached, trade sources said.

This is needed to prevent a sharp escalation in flour prices, triggered by a drop in procurement and estimates of lower-than-expected production, they added.

According to official channels, wheat procurement in the 2022-23 marketing year is estimated to be around 13.69 million tonnes till April 24, a sharp 35 per cent drop from the same period last year.

Wheat arrival in mandis is also almost 20 per cent less than last year. (see chart).

These revised export projections are in sharp contrast to the buoyant estimates made sometime in March before the impact of heatwave on the standing wheat crop and the extent of fall in official procurement were known. Some market participants were even projecting wheat exports reaching around 21 million tonnes in Fy-23.

So far, in the first three months of the current financial year (April-June), as per trade sources the country has managed to strike wheat export deals of around 3.5-4 million tonnes.

Of this almost 1 million tonnes has been shipped out largely to Bangladesh and Nepal through the land routes.

That apart, trade sources estimate that in the months of July to September, India might export another 1.75-2.0 million tonnes of wheat, as the pace usually slackens during the monsoon months due to logistical issues.

“Thereafter, the government will have to take a call whether it wants to keep the window of exports fully open or decide otherwise depending upon the final procurement numbers and also demand scenario,” a senior trade official said.

He said by September, the tenure of Centre’s extension of the Pradhan Mantri Gareeb Kalyan Anna Yojana (free food grains distribution scheme) for six months will also expire.

Which would further enable the government to assess the demand impact and take a final decision on exports.

“The expectations are that the global market too might not remain as favourable as it is now because Russia is poised to resume its wheat exports from June,” another trader said.

Meanwhile, on the procurement front, trade sources are convinced that official wheat purchases in Fy-23 are not going to exceed more than 25 million tonnes, which is a good 19.4 million tonnes less than the targeted 44.4 million tonnes.

“For the next 15 days, around 1 million tonnes of wheat should arrive in mandis across India which will ensure that procurement reaches almost 22-25 million tonnes, but if arrivals fall even further then procurement will fall further,” another trade official said.

Explaining the maths, the trade official said if procurement falls to 25 million tonnes which after getting added to the opening stocks of 19 million tonnes, will ensure a wheat availability of almost 44 million tonnes this year.

Of this, around 25 million tonnes is the demand for PDS, while another 16 million tonnes is needed for PMGKAY and Open Market Sale.

That will leave a very small surplus as the closing stock, unless the government decides to distribute less wheat through the free foodgrains scheme or curbs exports.

On production, most experts believe that India’s wheat crop in Fy-23 is expected to be much less than the projected 111 million tonnes and could be closer to 102-103 million tonnes.

To boost procurement, meanwhile, the Food Corporation of India (FCI) has reportedly decided to raise the proportion of shriveled wheat grains to 8 per cent up from the earlier levels of 6 per cent due to heatwave damaging crops.