Spotlight on India grain trade

As the planting of India’s rabi (spring harvested) crops for this season draws to a close, extremely favourable weather conditions and higher minimum support prices (MSP) have resulted in Indian farmers increasing the area planted to wheat, oilseeds and pulses.

This raises the potential for record wheat production in India for the fifth consecutive year, as well as record oilseed production when the crops are harvested in their spring.

Almost three months ago, India’s Cabinet Committee on Economic Affairs approved increases to the MSP paid to farmers for their produce.

The government’s stated goal is twofold – to ensure farm profitability and to encourage diversification into pulses and oilseeds at the expense of wheat, the major rabi crop, to correct domestic supply and demand imbalances.

The MSP for lentils was raised by 4000 Indian rupees (INR) per tonne, or $75.25/t, to INR55,000/t, or $1035/t.

Rapeseed and mustard seed MSPs were lifted by INR4000/t, or $75.25/t, to INR50,500/t, or $950/t.

For chickpeas, the MSP was raised by INR1300/t, or $24.45/t, to INR52300/t, or $984/t.

Wheat went up by INR400/t, or $7.50/t, to INR20,150/t, or $379/t, and for barley, the increase was INR350/t, or $6.58/t, to INR16,350/t, or $313/t.

This season’s rabi planting program has been delayed by a persistent monsoon that has lingered far longer than usual.

According to the Indian Meteorological Department, the withdrawal of this year’s southwest monsoon was the seventh most delayed retreat since 1975.

Consequently, rainfall across many of the major winter cropping states was 50 per cent higher than average in the three months to December 3.

Much of the increased rainfall fell in October, saturating fields and delaying preparation for winter crop seeding.

Some early sown pulse crops, such as chickpeas, suffered from waterlogging and poor germination – with the worst affected fields reportedly re-sown to wheat.

The late season rains delayed the wheat planting program by a couple of weeks.

But on the whole, it has benefitted from the above-average soil moisture profile.

Some fields that traditionally require irrigation prior to planting were sown without an autumn pre-water.

In other regions, the increased availability of irrigation water will allow farmers to plant more wheat before the planting window closes in the coming weeks.

The Indian government may be paying higher absolute prices to its farmers for pulses and oilseeds, but the projected net returns per hectare are still better for wheat than for pulses and oilseeds, and the associated production risks are much lower.

Accordingly, the wheat area continues to increase as farmers pursue the lower risk option.

According to the Indian Agriculture Ministry, the area sown to wheat – the main Indian rabi crop – totalled 20.07 million hectares across all states up to December 3.

The seeding program has been completed in most regions.

But the final figure is expected to be higher as the data from the late sown areas is collected in December.

This is 3.8 per cent higher than last season’s final planted area of 19.34 million hectares and augers well for this season’s production if the favourable conditions continue through to spring.

Dr Gyanendra Pratap Singh, one of India’s preeminent agricultural scientists, expects wheat production could be as high as 112 million tonnes this season.

This compares to the US Department of Agriculture’s current production estimate of 109.52 million tonnes.

Either way, it would be a record.

The run of good seasons in India has enabled them to build wheat stocks to such an extent that they have re-entered the export market in quite a meaningful way during the past two years.

The USDA pegged 2020-21 marketing year closing stocks at 27.8 million tonnes, 9.7 per cent of global ending stocks for last season, based on basis exports 2.56 million tonnes.

In 2021-22, the USDA has India exporting 5 million tonnes of wheat and ending stocks increasing to 10 per cent of the world total.

If the higher local production forecast proves correct, there is an additional 2.5 million tonnes that could be exported next year.

India has reportedly sold more than two million tonnes of wheat for export during the December-January period alone.

As of Friday last week, the area planted to pulses was 11.4 million hectares, compared to a final number in 2020 of 11.35 million hectares.

Like wheat, high domestic prices set the stage for above-average plantings this season.

But the late monsoon has altered planting programs in some regions, reducing the final planted area.

India’s rapeseed and mustard seed production is expected to jump significantly next harvest.

The country’s farmers, particularly in the northern states, responded to high domestic prices and the MSP incentive to increase their planted area.

Indian rapeseed futures have risen by almost 40 per cent this year, hitting a record INR8850/t, or $1676/t, in October – just as the planting campaign started.

As of December 3, the total area planted to oilseeds was up 29.4pc, from 6.47 million hectares to 8.37 million hectares.

The rapeseed area number on its own was even more impressive, soaring 30.2pc from 5.96 million hectares last year to 7.76 million hectares last week.

As a result, total oilseed production this season could be as high as 10 million tonnes, a national record and up from the 8.6 million tonnes harvested earlier this year.

While the potential is certainly there with a good start and a higher area, the extent of the production increase will be determined by rainfall and temperatures in the next four months.

India is the world’s biggest importer of edible oils, with imports of palm oil, predominantly from Indonesia and Malaysia, soybean oil, mainly from Argentina and Brazil and sunflower oil, primarily from Ukraine and Russia, costing the country a record US$15.7 billion during the past 12 months.

The significant rise in rapeseed production should decrease India’s import requirement in 2022.

Meanwhile, on November 29, the Indian parliament passed a bill to repeal three laws aimed at deregulating agricultural markets, bowing to pressure from farmers who have protested for more than a year, insisting the laws be revoked.

The contentious laws saw thousands of people, including many elderly farmers, brave extreme weather and a severe second wave of coronavirus infections to camp out on the fringes of New Delhi in the past year.

In addition to their repeal mandate, the protesting farmers are also demanding that the Modi administration introduce a law to extend the MSP scheme.

The government currently buys grains, predominantly rice and wheat, at the state-set MSP.

But the subsidies only benefit about 6pc of India’s millions of farmers.

Protesters are demanding an MSP mechanism for all crops and one that benefits all Indian grain growers.

This move has roused farmers across the country and taken the protests outside the country’s primary grain-growing states of Punjab and Haryana.

Indian farmers are excited about the government backflip on the deregulation laws, but they are committed to continuing the protests until the Modi administration also amends the MSP legislation.

The Esperance Express

Tags: pulses, mustard, rabi crops, planting, prices, oilseeds, wheat, India, chickpeas, rapeseed