US officials lift India import estimate, citing high prices, import duty cut

11.10.2016

Indian imports may rise further than had been thought, to the highest in a decade, US officials said, citing the spur to demand from firm domestic prices and a drop in import duty.

The US Department of Agriculture's New Delhi bureau raised to 3.0m tonnes its forecast for Indian wheat imports in 2016-17, the highest since 2006-07, and representing a sixfold increase year on year.

The figure is also above the 2.0m tonnes that the USDA has officially pegged India's buy-ins at, although Agrimoney.com has heard trade estimates as high as 5m tonnes.

The upgrade reflects the boost to prospects from a cut of 10%, from 25%, until March next year in India's wheat import duty.

"Market sources report that imports of wheat at 10% import duty will be economical for the millers at the current international prices, especially the southern and western mills due to the in-land freight advantage," the bureau said.

India introduced the duty in the face of domestic prices which have, amid suspicions that the country's latest harvest was even smaller than expected, bucked the falling trend of values worldwide, and remain among their highest levels of the past two years.

France, Ukraine, Australia benefit

India's extra appetite for wheat imports are expected to provide a welcome boost to demand from countries such as Ukraine and Australia, amid ideas of strong world supplies.

India has purchased about 700,000 tonnes from Australia, and deals signed with Ukraine have reached close to 350,000 to 400,000 tonnes, Reuters said, citing traders.

French customs data also showed that France exported 107,910 tonnes of wheat to India in July.

Demand to continue strong

India's domestic prices have surged since June due concerns over the size of 2016-17 harvest.

A deficient monsoon last year and warm winters have all affected the wheat crop.

While India's agriculture ministry estimates the size of the mid-year crop at 93.5m tonnes, private trade sources indicate the crop size around 82m-87m tonnes.

The USDA's India bureau expect the mid-year crop production around 90m tonnes.

"Strong domestic market prices during June to August strongly suggest tight domestic supplies due to lower production compared to the Ministry of Agriculture's estimate" the bureau said.

However, "import prospects are likely to be affected if the domestic prices decline or international prices increase by around 10% over current levels," it said.


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