There is a "high" likelihood of India releasing more wheat for export, displacing sales from other major exporting countries – but the process may not be all negative for world prices, Australia & New Zealand said.
India's government, which a year ago lifted a four-year ban on wheat exports, is likely next month to offer a further 500,000 tonnes for sale by tender, amid a campaign to run down its huge inventories, ANZ senior ag economist Paul Deane said.
State inventories as of the start of last month reached 43.2m tonnes – nearly four times the government target of 11m tonnes – exacerbating a storage squeeze which has left some 6m tonnes kept under tarpaulins.
A further 500,000 tender would exhaust 2m-tonne a quota the government announced in July, to cover the period up to February 2013.
However, the government looks set to allow further quota in the first quarter of 2013, once it receives "some certainty" about the next wheat harvest.
"We expect to see Indian wheat tenders re-emerge in the New Year," Mr Deane said.
These would "against displace sales from North America and Australia", at a time when many Chicago wheat bulls are hoping to see demand switching to the US.
Indeed, the decision over further Indian exports "places greater importance on the outcome of India's wheat crop this season than in recent years", Mr Deane said.
The comments come amid an increasing focus on India's wheat exports, given the country's huge potential for shipments, which it has historically been afraid to exploit for fear of leaving itself short of a staple food.
While the country has historically been known for feed wheat shipments, amid doubts about the quality of its storage infrastructure, India in August sold 100,000 tonnes of 11.5% protein wheat to Thailand.
Indian milling wheat was also rumoured to have been offered, at competitive prices, to a Tunisian tender last month, moving into a North Africa market which is typically the stranglehold of Black Sea and European exporters. Agrimoney.com has been unable to confirm this rumour.
And, besides the grain offered by state enterprises - State Trading Corporation, Project Export Corporation (PEC) and Mineral and Metal Trading Corporation – private merchants have also sold wheat, to the tune of 1.7m tonnes between April and September, according to US estimates.
However, India's export process could give some support to wheat prices for now, given the results from an ongoing tender, which on Friday showed State Trading Corporation receiving a bid of $315.20 a tonne, from Cargill, for 30,000 tonnes of the grain.
Mineral and Metal Trading Corporation last week revealed a highest bid of $318 per tonne for its allotment.
These compare with prices from tenders last month of $310 per tonne for supplies from west coast ports and $320 per tonne from the east coast.
"We would view sale prices maintaining October levels as supportive for grain markets, given that corn and wheat futures are 3% lower than October and the high volumes being offered," Mr Deane said.