Bloomberg: In a world with too much wheat, a shortage in India is proving a blessing for Black Sea exporters contending with lower prices

17.01.2017

After tapping cargoes from Ukraine and top shipper Russia, India has turned to Bulgaria for the first time ever. The European nation, which collected a record crop this season, has already unloaded at least one cargo of soft wheat in India since December, people familiar with the matter said.

An El Nino-induced drought cut India’s wheat output this season, forcing the world’s second-biggest user to boost imports to a decade-high, according to the U.S. Department of Agriculture. As traders predict the country may need between 3 million and 6 million tons, Bulgarian shippers have struck deals to supply 200,000 tons, estimated Martin Roussev, chief executive officer of exporter Vitagrain BG in Sofia.

"In a market which is so heavily supplied, India does bring some additional and very welcome demand," said Charles Clack, an analyst at Rabobank International in London. "We currently have an import estimate of 4 million tons for 2016-17 and hold a bias that this could be revised higher."

India typically hasn’t needed to import much wheat in the past decade because it normally produces enough to match consumption. The increased demand is one of the few bright spots in a market grappling with record world grain stockpiles that pushed benchmark Chicago wheat futures to a 10-year low in August.

Black Sea countries stepped up shipments after India first cut import duties and then scrapped them. They’ve also benefited from a waiver on using a chemical banned by some nations to fumigate wheat before exporting.

Indian Demand

India purchased a record 1.5 million tons of Ukrainian wheat since the season began in July, replacing Thailand as the top buyer of the country’s grain, according to researcher UkrAgroConsult. Swiss trader Solaris Commodities shipped 48,000 tons of Russian wheat to India in November, the biggest ever cargo between the nations.

Now Bulgaria is taking advantage. The Orient Lucky vessel carrying soft wheat from the country unloaded at India’s Mundra port last month, said two people familiar with the matter, who asked not to be identified because they’re not allowed to speak to the media. The ship loaded in Varna was carrying about 25,000
tons, according to one of the people and ship-tracking data on Bloomberg.

"I’ve never seen India in the Bulgarian line-up before," Vitagrain’s Roussev said. "It’s quite unusual that India imports Black Sea wheat in general."

Shipments may be further boosted after India extended until March 31 a waiver on using methyl bromide to fumigate cargoes, a chemical that most Black Sea grain exporters don’t allow.

Bulgaria requested an exemption from using the chemical and approval may spur the nation’s shippers to sell a few more cargoes in February and March, Roussev said.

Black Sea nations may export another 1 million to 1.5 million tons of wheat to India this season, taking market share from traditional suppliers France and Australia, said Sergey Feofilov, general director of Kiev-based UkrAgroConsult. India’s total imports could reach 6 million tons, he said.

"The key advantage the Black Sea has in the Indian market is the high production of wheat and high quality," Feofilov said.

 

By Isis Almeida and Manisha Jha, Bloomberg

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