The recent Grain: World Markets and Trade report by the US Department of Agriculture (USDA) signifies a potential surge in India’s wheat and rice exports.
USDA’s Findings on Increased Exports
The USDA has revised its forecast, estimating Indian wheat exports for 2020-21 (July-June) to reach 1.8 million tonnes (mt), up from 1 mt initially. The department also predicts Indian rice exports will set a new record of 14.4 mt for 2020, higher than in previous years.
Factors Triggering Increase in Wheat Exports
China’s strategic stockpiling appears to be influencing global prices, although their specific reasons remain unclear. Russia’s response to rising local prices—imposing an export tax on wheat—has shifted potential importers like Bangladesh towards India. Another factor is the ultra-low interest rates in many countries, including USA, India, and Russia, leading to increased investment in agri-commodity markets.
Reasons for Rise in Rice Exports
The speculated increase in rice exports stems from droughts in Thailand and Vietnam, India’s closest competitors. This situation has led to reduced rice productivity in these countries while demand for rice in Bangladesh continues to rise.
Challenges and Solutions to Rising Exports
Despite the positive outlook, Indian wheat’s competitiveness remains hindered by the government’s minimum support price (MSP) of Rs 19,750 per tonne. Additional costs such as cleaning, bagging, loading, and transportation further devalue its export potential. A potential solution could be procuring wheat below MSP from states like Uttar Pradesh, Bihar, Gujarat, and Maharashtra, where government procurement is scarce.
Impact on India’s Domestic Production
This positive surge in exports coincides with record domestic production of rice and wheat, reaching 118.43 mt and 107.59 mt respectively in 2019-20. Government agencies’ procurement also reached an all-time high that year, straining the government’s funds.
Overview of Indian Cereal Export
India stands as one of the world’s leading producers and exporters of cereal products—including wheat, paddy, sorghum, millet (Bajra), barley and maize. Due to immense global demand and surplus domestic production, India allows limited export quantities despite previously imposing an export ban on wheat and rice in 2008 to meet domestic needs. In 2019-20, rice (including Basmati and Non Basmati) accounted for 95.7% of India’s total cereal export, with other cereals, including wheat, making up a mere 4.3%.
Major Export Destinations in 2019-20
For wheat, Nepal, Bangladesh, UAE, and Somalia were the key countries. Non-Basmati rice was primarily exported to Nepal, Benin, UAE, and Somalia, while Basmati Rice found its largest markets in Iran, Saudi Arabia, Iraq, and UAE.
