India's wheat exports to set new record in 2013-14

India's wheat exports will grow further next season, setting a fresh record high and cementing the country's place as a major shipper, as another strong harvest threatens to exacerbate a "severe" storage problem.

India's wheat exports - expected to reach 6.5m tonnes in 2012-13, overtaking those of Ukraine - will grow a further 1.5m tonnes in 2013-14, US Department of Agriculture staff in New Delhi said.

That level, while still a little under half those typically expected from leading shippers such as Australia, Canada and the European Union, would represent the highest on record for India, which only in September 2011 lifted a temporary ban on shipments.

The entry in earnest into international markets is being fuelled by a series of strong harvests, encouraged by government subsidies, which are expected to see inventories end 2012-13 at 23.8m tonnes - more than three times the government target of 7.0m tonnes.

'Unprecedented storage crisis'

This year's harvest, which is a little over a month away, is expected to end a run of successive records stretching from 2008-2012.

However, at an estimated 92.0m tonnes, it would still be the second highest on record.

And even with government efforts to boost domestic consumption, and soaring feed use, rising by more than 10% a year, the harvest will still, again, comfortably exceed India's own needs.

With the government buying 41% of last year's harvest, and forecast purchasing 44% of this year's through its support programmes, state agencies "are facing a severe shortage of storage capacity", the USDA bureau said.

After harvest last year, when the government faced an "unprecedented storage crisis", some 6m-7m tonnes of wheat was stored in the open.

"Storage under these conditions results in significant losses due to damage from rain, temperature fluctuations, rodent/pests, and to pilferage," the bureau said in a report.

"The food grain storage crisis is likely to escalate further in 2013-14," thanks to the extra government procurement expected.

Tipping point?

While the storage shortage has raised some reputational questions over Indian exports, they have been supported by strong international demand for supplies at a time when supplies in many major exporting countries, such as Argentina and Russia, have been sapped by reduced harvests.

Indeed, with current international prices higher than the $252 a tonne that India's government has been buying wheat at, the state "is likely to continue to liquidate additional wheat stocks in the export market in 2013-14 and possibly 2014-15", the report said.

However, a drop in international prices would threaten Indian exports, with prices below $252 a tonne, or the $262 a tonne that it has been selling wheat at one the open market, likely to spark both other governments and domestic millers to make "accusations of subsidisation", in breach of World Trade Organization commitments.

Major export destinations for Indian include neighbouring Bangladesh, North Korea and Indonesia, although supplies have gone far further afield, with UK trade data earlier this week revealing some Indian imports.

India's what is largely of soft-medium hardness, with medium protein levels, comparable to US white winter wheat.

Egypt bought US soft red winter wheat on Wednesday at $296.75 a tonne after a request for offers from a range of countries, although only American grain was tendered.

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