India Wheat Buying Stumbles

The Indian government's wheat procurement this year has missed its estimate by nearly half, which may put pressure on Prime Minister Manmohan Singh's administration as it prepares to roll out a food-security law.

Lower purchases would also whittle surplus stocks available for exports. India has emerged as a leading exporter of wheat in the past few months.

The government is now expected to procure about 25 million metric tons from farmers this year compared with its initial estimate of 44 million tons to 45 million tons, said senior government officials who didn't wish to be named.

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"We really don't know why the procurement is so low. Maybe private companies bought more from farmers this year," a food ministry official said. "We are not worried as we have abundant stocks."

Wheat and rice are India's top two grain staples. Although the country has sufficient stocks of food grains, the government might find itself in a corner if summer-sown rice output declines.

Stocks will likely come under pressure as soon as the government pushes ahead with its ambitious food-security law that promises the right to nearly free grains to about 70% of the country's more than 1.2 billion people.

The government is debating if it should implement the law through an executive decision or after a general debate in Parliament.

Government officials said the lower purchase wasn't due to a drop in production. Initial estimates have pegged output at 93.6 million tons this year, near a record high.

"The production is going to be around that level," said Indu Sharma, director of the state-run Directorate of Wheat Research.

Excessive winter rains hurt output in the breadbasket northern states of Punjab and Haryana, but that had been offset by a bigger crop in states such as Madhya Pradesh and Uttar Pradesh, she said.

However, private traders said the government's production estimates may be wide off the mark.

"I think the overall crop production is low this year," said a senior Mumbai-based executive of an international commodities trading firm. It is probably much below 90 million tons, said the executive.

"We are close to the end of the procurement season, but there is just no wheat available in the market," the executive said. "It's a lie that private traders are buying up all the wheat."

Traders also said it didn't make sense to compete with government agencies to buy aggressively as state-fixed prices are much higher than international rates.

India's government pays a minimum price to farmers for certain staples such as wheat and rice to ensure there is no supply shortage

Regards Pankaj Katba

Email: Pankaj@feedgrainagri.com