Market Matters Blog

India's wheat exports have more than quadrupled in the past year and for the first time, India's government is allowing private companies to export up to 5 million metric tons (about 184 million bushels) wheat from government stocks.

Striving to feed a booming population and prevent piling grain on the ground to spoil, India has to empty its wheat warehouses. It's ending stocks for 2012-13 are forecast to grow about 10% to 21.95 mmt from last year's 19.95 mmt, according to USDA. India's wheat production is expected to grow 7 mmt (+8%), more than offsetting USDA's anticipated 6.5 mmt (a 630% increase year over year) in exports.

India has allowed 4.5 mmt of wheat from government stocks to be sold on the world market since July. So when you add in the new 5 mmt India okayed for export in the next three months, the country's aiming to export nearly 10 mmt of wheat. That's an ambitious goal for a country that exported less than 1 mmt last year and just a fraction of that the year prior.

India's allowing private companies to export wheat at a minimum price of $320, but most recent international tenders for Indian wheat have been quoted at below $300 per ton, according to Dow Jones Newswires. So while the country is facing a problem of plenty and has proposed a solution, they may have priced it out of the market. Unless, for some reason, global prices go up, India's goal of clearing more bin space before the next harvest is more like wishful thinking.

Add to it that global supplies are plentiful, with a stocks-to-use ratio of 26.2%, and expectations for large global production in the 2013-14 crop year. Thursday morning, the United Nation's Food and Agriculture Organization estimated that global wheat production in 2013-14 is expected to increase 4.3% or 690 mmt, making it the second-largest crop on record.

So, what does this mean to the U.S. wheat market? Our stocks are plentiful, too, and as we've seen in the past few months, prices here are eroding too. Chicago wheat is down more than $1 since February. So India's export goals means more competition in the export market and if they're priced below U.S. wheat, they could steal some of the little business we've got.

USDA will, of course, provide an updated picture on global and domestic stocks figures on Friday, but it isn't expected to announce any changes that will alter the fundamental fact of large global supplies.

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