Brain Booster for UPSC & State PCS Examination (Topic: India's Opportunity for Wheat Export)

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Topic: India's Opportunity for Wheat Export

India's Opportunity for Wheat Export

Why in News?

  • Recently, the US Department of Agriculture (USDA) upped its forecast of Indian wheat exports for 2020-21 (July-June) to 1.8 million tonnes (mt), as against its earlier estimate of one mt which would be the highest ever in the last six years.

Rising Demand for India’s Wheat

  • Due to surging international prices from Chinese stockpiling and ultra-low interest rate, money increasingly finding its way into agri-commodity markets. After rice, India is set to turn a major exporter of wheat as well.
  • Due to rising global prices, wheat future contracts for March delivery at the Chicago Board of Trade exchange are currently at $244.35 per tonne (18.3% higher than the $206.59 a year ago). This opens up possibilities for Indian exports to nearby markets, especially Bangladesh that buys mostly from Russia.
  • With the Russia government levying a 25 euros-per-tonne export tax on wheat effective from February 15 – in response to high domestic prices, Bangladesh is beginning to shift its purchases towards India.

Domestic Situation

  • According to the agriculture ministry, wheat prices in Uttar Pradesh have increased from around Rs 1,575 a quintal to Rs 1,700. In Madhya Pradesh, wheat has gone up from around Rs 1,500 to Rs 1,710 in Ujjain district, while in Indore, the price has climbed from Rs 1,700 to Rs 1,850 a quintal.
  • The Centre had fixed the minimum support price of Rs 1,925 a quintal for the 2019-20 (July- June) crop year. The wheat that is arriving in the market is the stock held back by traders or farmers after the harvest of the rabi crop in April.
  • Wheat is grown during November-March, with harvest taking place around February-end in states such as Gujarat and March-end or early April in other parts of the country.
  • Until now, India’s exports have been minimal with its domestic support price (MSP) making it uncompetitive. But with strong global demand and tight exportable supplies from traditional exporters resulting in high prices, India is now relatively competitive to its nearby markets such as Bangladesh with its forecasting rising to the highest in six years.

Wheat Economics for Exports

  • For farmers, cultivating wheat is easy as input costs are less and MSP is guaranteed. They need to put in much less effort compared to crops such as paddy. It is also a safe bet as diseases in wheat plants have been controlled.
  • Gujarat Rabi wheat crop, which is expected to be harvested in February, could be exported since prices there are usually lower than MSP.
  • The USDA expects India to more than offset the lower exports projected from Argentina and Russia in the global market this year.
  • According to the USDA, India could be left with 31.31 million tonnes of wheat carryover stocks this April when the Centre begins its procurement for buffer stocks used for the public distribution system.

Bumper Crop

  • Prospects for the upcoming wheat harvest (2020-21) are bright.
  • Record sown area and benign weather have combined to raise the prospects of harvest to well over 100 mt, possibly close to 105 mt. Of course, as it happens often, the government’s production estimate, due by end-February, may turn out to be even higher.
  • This will be the third successive year of massive harvest in the country. As on January 1, acreage is estimated at 32.5 million hectares, higher than the 5-year average of 30.3 million ha.
  • The eventual planted area may well touch 34 million ha — slightly higher than 33.6 million ha of 2020 crop.