Lavish Indian wheat support 'hurting' world market

India's support programme for wheat growers was attacked for "negatively affecting" the world market amid an increasing focus on the country's growth as a producer, with a record 100m-tonne harvest in its sights.

US Wheat Associates, which promotes US sales of the grain, warned that "poor government policies" were behind a rise in India's status as a wheat producer, and exporter, which has prompted official forecasts of the country achieving its first 100m-tonne harvest this year.

India, which offers its farmers a minimum of 13,500 rupees ($215) per tonne, has "consistently ignored" promises made to the World Trade Organization over subsidising exports, US Wheat Associated president Alan Tracy said.

Given transport costs of some $80 a tonne for getting wheat from India's interior to port, sales prices of $279.52-283.60 a tonne at a tender which closed on January 14 imply shipments are indeed being financially supported.

"Considering the cost to get wheat to ports, clearly the puppeteers in India's government have pulled the wrong strings and cannot compete in world wheat trade without paying significant export subsidies," Mr Tracy said.

He added that, "with most of India's storage capacity already full of an estimated 20.0m tonnes in carryover stocks, it is not surprising that India is aggressively promoting exports".

'Negatively affecting trade'

The muffling of market forces, and with officials forecast a 100m-tonne harvest this year, means India's dynamics represent an issue for the world trade.

"There can be no doubt that [India's] erratic and sometimes contradictory price support and export policies are spilling out of its borders and negatively affecting world wheat trade," Mr Tracy said, urging a greater focus on underlying dynamics.

"Policies that reflect the true nature of the world market would better serve wheat farmers and their customers."

Canadian questions

The dramatic growth in India's status as a wheat shipper, with its exports soaring to 6.82m tonnes in 2013-14 from 72,000 tonnes two years before, has attracted the attention of Canada's government too, which has requested that the issue is taken up by the WTO.

It has tabled questions to a meeting of the WTO agriculture committee on Wednesday over India's exports, noting that India's government has lowered the floor price for exporting surplus stocks from state reserves to $260 a tonne from $300 a tonne.

This is "lower than the price of the same quality wheat from Canada (and other countries) sold in the range of $270-275 per tonne", Canada said in its representation flagging, as a wheat exporting country itself, a "commercial interest" in India's policy.

"Could India elaborate as to the volume of wheat stocks held by the Food Corporation of India? How does India determine the floor price for wheat exports?" Canada asked.

The WTO has granted India, and some other developing countries, a reprieve against legal action of breaching farm subsidy limits, as part of a deal struck at a WTO Ministerial meeting in Bali last month.

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