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Wheat Imports To Hit Decade High As Weather Woes Curb Output
A spike in overseas purchases by India, the world's second largest producer and consumer of the grain, could take some pressure off benchmark wheat prices that are mired near five-year lows
India's 2016/17 wheat imports are expected to surge more than five-fold to the highest in a decade, as a severe drought linked to an El Nino weather event and unseasonal rains push domestic output down to the lowest since 2011, a Reuters survey shows.
A spike in overseas purchases by India, the world's second largest producer and consumer of the grain, could take some pressure off benchmark wheat prices that are mired near five-year lows of $4.42-1/4 a bushel amid ample world supplies.
Wheat arrivals into India are likely to reach 2.75 million tonnes in the year to June 2017, according to the survey of 11 analysts and traders. Imports would have been even higher, but surplus stocks from a series of bumper harvests since 2007 are expected to help pick up some of the slack in output, they said.
The Reuters poll pegged India's wheat output at 85 million tonnes for 2016, below the government's target of 93.82 million tonnes and the 2014/15 output of 95.6 million tonnes, reflecting the impact of back-to-back drought years for the first time in three decades and unseasonal rains.
"The trend yield is not going to be reached after the dry, hot conditions at the start of the season and then rains at the end of the cycle, which have raised a serious question mark over the quality of the crop that will be harvested," said analyst Gabriel Omnes from French consultancy Strategie Grains.
A clearer picture of the Indian crop size will emerge once the harvest winds up next month, following which the country may abolish its 25 percent tax on wheat imports, traders and analysts polled by Reuters said.
"It is becoming increasingly clear that India will have a sharp reduction in its crop, while steady economic growth is increasing spending power and demand," said a German trader.
"I expect a change in trade patterns from July, with the Indian government likely to end wheat import duties to allow wheat to come in."
However, India's wheat imports will not match the estimated about 10-million-tonne drop in output, given its stockpiles of the grain. According to the U.S. Department of Agriculture (USDA), India's wheat stocks will dwindle to 17.2 million tonnes in 2015/16 from a record 24.2 million tonnes two years ago.
"India could have been in the market for much bigger volumes," said one Singapore-based trader.
At 2.75 million tonnes, India's wheat imports would be the most since 6.7 million tonnes arrived in 2006/07 and above an eight-year top of 500,000 tonnes last year, USDA data shows.
The highest estimate for imports in the Reuters survey was 4.5 million tonnes, while the lowest output forecast was 82 million tonnes.
"The weather condition will play an important role in the coming weeks," said Anil Monga, managing director of Emmsons, a top New Delhi-based trader. "If temperatures rise further in the next few days, let's be ready to see a sharply lower yield."