Wheat stocks dip to lowest since 1998

Wheat buffer stock level would hit the lowest since 1998 at about 6.5 million tons for the year ending March 2004, owing to decline in production and lower procurement. However, this was above the government's required minimum buffer stock level of 4 million tons.

The decline in wheat production was caused by damage to the crop following the heat wave in the months of March and April. This was is likely to adversely affect government wheat procurement, despite an initial surge due to the early harvest.

The government procured around 7.6 million tons of wheat up to April 15, 2004, compared with 4 million tons procured during the corresponding period of last year.

However, total procurement during this marketing year (Apr-Mar) was likely to be only 17-18 million tons against the government's earlier expectation of over 20 million tons.

With the private trade showing very little interest, the government was buying most of the wheat arriving in the grain markets (mandis) in northern India at the support price of Rs 6,300 ($143) per metric ton, according to a report by Global Agriculture Information Network.

Government wheat stocks declined sharply to 8.6 million tons on March 1, 2004, from 18.6 million tons a year ago. Stocks on April 1, 2004, were around 6.5 million tons. This was above the government's required minimum buffer stock level of 4 million tons but the lowest since 1998.

Lower stocks, combined with likely lower than expected wheat procurement, was expected to discourage the government from allocating large quantities of wheat for exports at subsidised prices. The government was reportedly considering providing a WTO compatible subsidy to exporters, according to sources.

The government has discontinued making fresh allocations of wheat for exports since August 2003. It has however continued to allocate quantities against earlier contracts.

As a result, exports during April 2003 to March 2004 was close to 6.4 million metric tons (including land movement to Bangladesh), against an earlier estimate of 5 million tons. On a July "�June basis, exports in 2003-04 were estimated at 5.5 million tons.

However, exports were forecast to decline sharply in fiscal 2004-05 on account of lower government stocks and procurement below expectations. One estimate has pegged 2004-05 exports at 2 million tons.

USDA on its revised downward the wheat crop being currently harvested to 73 million tons from a February forecast of 76 million tons because of the high temperatures during March and April in major wheat growing regions.

The unusually warm weather at the crop maturation stage had reportedly caused a reduction in potential yields, ranging from 3 per cent in the major surplus regions of Punjab, Haryana, and western parts of Uttar Pradesh, to 15 per cent in Bihar and eastern parts of Uttar Pradesh, where wheat was typically planted late.

The early-planted wheat crop in central India, however, was mostly unaffected. The temperature-induced early maturation of the crop advanced wheat harvesting by almost two weeks and was likely to affect grain quality.