India to reach near-record wheat production
Due to the continued increase in the government’s Minimum Support Price (MSP) and an effective government procurement program, wheat acreage has been relatively steady.
After two years of slowdown in production, India is heading for a near-record wheat harvest this summer on record planting and relatively favorable growing conditions in major growing areas, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a Feb. 24 report. Assuming normal weather conditions through harvest, the FAS forecasts wheat production for the marketing year 2017-18 at 95 million tonnes from a record 31.8 million hectares, marginally lower than the record harvest of 95.9 million tonnes in market year 2014-15. Although the Ministry of Agriculture’s estimate pegged 2017 wheat production at a record 96.6 million tonnes, trade sources estimate production between 90 million tonnes to 95 million tonnes. According to the report, estimates for the market year 2017-18 durum wheat production is currently at 1 million tonnes, same as last year on reported lower planting but higher yields.
Due to the continued increase in the government’s Minimum Support Price (MSP) and an effective government procurement program, wheat acreage has been relatively steady in recent years. Unlike the weak international wheat prices, domestic prices have been very strong during market year 2016-17, which has bolstered the wheat acreage to a record 31.8 million hectares in market year 2017-18. Although India’s wheat crop is largely irrigated (91%), monsoon rainfall affects soil moisture conditions and irrigation water availability at the time of planting and critical growth stages, thereby affecting overall harvest prospects.
Wheat consumption in market year 2017-18 is forecast at 94 million tonnes, nearly same as last year, on forecast sufficient domestic supplies and continued imports of expected “cheap” international wheat, the report said. The government is likely to continue selling wheat at subsidized prices through the public distribution system (PDS), and smaller quantities to local millers through the Open Market Sales Scheme (OMSS) to contain domestic prices. Assuming no significant changes in the international wheat prices and import policy, southern India millers are likely to continue to augment their wheat requirements through imports. According to the report, the private millers near the ports find imported wheat more economical due to the lower shipment costs compared to the inland transport cost from the wheat growing areas in north/central India even at the MSP. Wheat use for feed consumption and residual is forecast higher at 4.8 million tonnes on steady demand from the dairy feed sector.
According to the FAS, most commercial feed caters to poultry and aquaculture farms, which largely uses corn, oil meals, and other coarse grains including small quantities of spoiled/inferior quality wheat. There is very limited use of wheat by the organized feed sector as the dairy industry is highly unorganized. With the average dairy herd size estimated around 2 to 3 animals per farm, feed use is typically restricted to lactating animals, and includes some oil cakes, household food waste, and other grain mixes. Market sources report that the recent trend of replacement of local low-yielding dairy animals by higher yielding crossbred cows and “murrah” breed buffaloes has increased the demand for commercial dairy feed by about 12% to 15% per annum, supporting higher wheat usage in the dairy feed sector. The spoiled and inferior quality wheat, both government-held and open market, is used for animal feed. Market sources believe that the current tight government-held wheat stocks will limit diversion of governm
The organized milling sector is relatively small, about 1,200 medium to large flour mills with aggregate milling capacity of 24 million tonnes to 25 million tonnes, which mill mostly maida (flour) and semolina to cater to hotels, restaurants, and institutional sector demand, and produce bran flakes for the mixed feed industry. Market sources report that the most mills are operating at 50% to 60% of their capacity, and process about 12 million tonnes to 14 million tonnes of wheat per annum.