India, once known for its famines, is expected to have government-owned stores of 100 million tonnes of wheat and rice when harvest of the winter crops is complete this June.
To put that in perspective, Canada’s total grains and oilseed production last summer was 70 million tonnes.
After droughts in the first half of the 2000s and strong food price inflation, India has tried to boost food self-sufficiency by providing attractive base prices for crops and subsidizing fertilizer costs.
Production is growing. Total food grain production for 2012-13 will be 250 million tonnes, up from an average of 200 million tonnes in 2000-05. The government buys all production offered to it, which leads to the wheat and rice mountain.
However, there is storage for only 47 million tonnes. The rest sits outdoors, covered by tarpaulins.
Not surprisingly, there is a huge spoilage problem. As well, the inefficient and corrupt food distribution system has trouble getting food to the country’s 500 million poor.
The government wants to boost exports as a way to manage this surplus. Reuters reports that India hopes to export six million tonnes of wheat in 2013 and allow private exporters to ship another two million.
This would move it into the ranks of the top 10 global exporters. Its shipments have helped make up for the absence of Black Sea wheat in recent months. However, India’s export hopes will be impeded by poor transportation and port infrastructure.
Another problem is that the government might have to export wheat at a value less than the purchase price if global prices drop in 2013-14.
The government faces strong budget stress, but its farm support and food subsidization programs are popular and national elections slated for next year mean there is little likelihood of cuts.
India’s ability to continue expanding depends a lot on monsoon rains and groundwater irrigation, but at some point, water shortages will limit production.