India is back in the wheat market in a big way and Canadian farmers are among the biggest beneficiaries.
The world’s second most populous nation bought 2.2 million tonnes of wheat last week, about half of it from Canada.
Toepfer International will ship 720,000 tonnes of western Canadian hard red spring wheat to India under the Canadian Wheat Board’s accredited exporter program.
Another 300,000 tonnes of Ontario soft red wheat will be shipped by Archer Daniels Midland Co., for a total of 1.02 million tonnes.
“That’s a big deal,” said Rick Steinke, director of market analysis for the CWB. “It’s good transaction for farmers economically.”
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The board declined to reveal details about the quality or price of the wheat. The other suppliers of the tender are Europe, Russia and Argentina.
Published reports said
India paid an average price of around $220 Cdn a tonne for the tender of 2.2 million tonnes, for a total value of around $480 million. Based on that, the Canadian sale would be worth about $225 million.
Canada has sold wheat to India in just five of the past 30 years, most recently in 1996-97, when shipments totalled 266,000 tonnes. The record is 1.035 million tonnes in 1992-93.
India is one of the world’s biggest wheat producers, growing about 70 million tonnes a year, and has become a significant exporter in recent years, shipping as much as 5.7 million tonnes in 2003-04.
However, a shortage of moisture in the past two monsoon seasons led to a sharp reduction in stocks and left the government scrambling to meet the constantly growing demand from the population of 1.1 billion.
Season-ending stocks have declined from 23 million tonnes in 2003 to a projected 4.1 million tonnes in 2006, while the ratio of stocks to domestic use has declined to 2.7 percent from 35 percent four years ago.
“We’ve been watching the situation there and their entrance into the market wasn’t unexpected,” said Steinke. “They simply haven’t been able to procure enough wheat from their domestic crop the last two seasons.”
India has imported a total of 3.5 million tonnes so far this crop year, its biggest total since 4.3 million tonnes in 1982-83. However, its goal remains self-sufficiency.
The Indian government said following last week’s purchases that it does not intend to issue any more tenders this year, but at the same time it reduced tariffs on wheat imported by private companies to five percent from 50 percent.
Steinke said that’s a clear signal that the government recognizes the need for continuing imports.
“They have a medium-term problem and I expect they’ll be in the market for the next year or two, and hopefully that will continue”
Steinke said the long-term future will depend on whether researchers can find ways to boost wheat yields, which have been declining in recent years, in order to meet burgeoning demand.
About 45 percent of the board’s exports are conducted through accredited exporters to minimize risks to producers.
