The US Department of Agriculture has revised India’s wheat production for 2016-2017 (April-March) to 87 million mt, down from the earlier forecast of 90 million mt, because of tight domestic supply in its November report for grain and feed.
Despite the optimistic outlook for India’s 2015-2016 crop year(July-June) by its Ministry of Agriculture with production of 93.5 million mt, market sources estimated actual output only around 82 million-88 million mt.
Wheat stocks held by the Food Corporation of India as of October 1 were 21.7 million mt, slightly above the government’s quarterly target of 20.5 million mt.
In the fourth quarter of last year, government-held stocks were around 11 million mt higher.
Higher domestic prices during June-August, especially in the southern states where prices were around Rupees 21,000/mt ($315) in August, compared with Rupees 20,400/mt in July.
The higher prices indicate tighter domestic supply because of lower production, sources said.
Although prices dropped by less than 1% in September, it was firmer in October, despite higher influx of arbitrage cargoes.
The import tax on wheat was reduced from 25% to 10% from September 22 to February 28, 2017, amid concerns about soaring food prices ahead of the festival season in October, and higher offtake of government-held stocks during the first half the fiscal year.
Platts data showed about 120,000 mt wheat from Australia were sold to India in October, with the Indian specifications of methyl bromide fumigated Australian Standard White sold at about $216.50-217/mt CFR Tuticorin for mid-Dec to mid-January shipments while Indian specs APW were sold at $223-224/mt CFR.
Prices have since moved up to about $230/mt CFR for APW to India and about $220/mt CFR for ASW loading in December-January, to arrive during the window of lower tariffs, traders said.
Meanwhile, Indian demand supported Australian and Ukrainian wheat prices. Selling indications for new crop APW have moved from sub-$200/mt in late September to the mid- to high $200s/mt FOB WA in recent weeks.
On November 2, Platts APW was at $202.50/mt FOB WA for January-loading cargoes, up $1/mt day on day, owing to firm selling indications given delayed harvesting and possible wheat production losses from frost damage in Western Australia, the biggest wheat exporting state in Australia.