India needs to buy wheat on the world market this year and probably next year, too.
But will it?
The answer is probably yes, T.P.S. Narang told the Canadian Wheat Board’s Grain World market outlook conference.
But elements of Indian society won’t be happy about it.
“In India, it is seen as a sign of dependency if wheat or rice is imported,” said Narang, a grain importer and merchandiser with the government-operated PEC Ltd.
But the country has no problem importing soybeans or pulse crops because those aren’t seen as sensitive commodities.
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Wheat and rice are staple foods in the Indian diet and many in India see importing these from the West as a humiliating failure to be self-sufficient.
Narang said the Indian government has worked hard since the 1960s to wean India off its previous need for massive basic food imports. The country implemented price support policies that encouraged farmers to grow wheat and rice.
At times, as in the early years of this decade, that has led India to produce large surpluses, which have ended up in the world market, surprising many who assumed India would always be an importer.
But the size of the Indian wheat crop has stagnated, Narang said, even as demand has grown, because farmers see better opportunities elsewhere.
“They are shifting to more profitable crops,” Narang said.
Also, India’s urban growth in the past few years has caused developers to take large amounts of arable land for industrial and residential construction.
This is putting the Indian government in a worrisome spot, Narang said, because its massive population of poverty-stricken people relies upon affordable food. When grain stocks fall, as they have in the past year, the ability of the government to guarantee the poor can get affordable food becomes a political issue.
Narang said he is almost certain India will import wheat this year because stocks have fallen from a comfortable 17 million tonnes to 13 to 14 million tonnes. And while early conditions of the Indian wheat crop were good, recently it has been downgraded from an expected 74 million tonnes to 72 million.
“This month is critical to the size of the crop. All the expectations fell flat and the authorities have started getting nervous,” said Narang.
If and when the Indian government instructs the country’s grain merchants to begin importing wheat, he thinks they will have to pay the usual premiums of $15 to $20 US per tonne because of all the complications.
Not only does the Indian government regulate the contracting of grain sales, but phytosanitary standards have blocked shipments from a number of countries including Canada, so many companies demand higher prices to make up for the extra hassle.
Right now, U.S. wheat cannot be imported into India because of a dispute over weed seed levels.
He said the Indian government reluctance to import grains made sense in the 1960s, when the nation had almost no foreign currency reserves. But now it has about $180 billion in reserves.
“Paying for four or five million tonnes is not an issue,” said Narang.
