The global crop trade is eyeing India as the new government may ease restrictions

Article content

(Bloomberg) — Agricultural markets are watching for potential shocks to India’s trade policy after a new government takes office this month, which could have a significant impact on global food prices.

The fifth-largest economy held key crops such as sugar and some major rice varieties from global markets for more than a year. Prime Minister Narendra Modi has sought to ensure adequate domestic supplies and contain consumer costs ahead of national elections, backtracking on his promise to “feed the world” after Russia invaded Ukraine. It also refrained from cutting the tax on wheat imports to appease farmers, who constitute a large voting bloc.

Article content

Prices for some agricultural commodities have fallen from all-time highs, and state agencies are also struggling to stockpile and sell some of the grain from state reserves. This raises the possibility of changing the restrictions after the election results are announced on June 4.

A spokesman representing the Ministry of Food and Trade did not immediately comment on the situation.

Any relaxation in foreign sales could ease Asian benchmark rice prices, which are near a 15-year high, and contribute to a decline in sugar prices. However, Chicago wheat price increases could increase further if the administration accepts the industry’s demand to lower import fees to increase local supplies.

Rice:

The country banned the supply of broken and white rice and imposed a 20% tax on the parboiled variety. The move, which restricted global supplies and helped drive up global prices, was a major blow to some West African and Middle Eastern countries that largely meet their needs for staple foods from India.

“Indian rice millers will request the new government to allow export of broken and white rice,” said BV Krishna Rao, president of the Rice Exporters Association. He said the industry had no objections to the introduction of a fee, but the restrictions should be lifted.

Article content

Article content

Supplies in the country are adequate and the forecast of above-normal monsoon increases the harvest prospects for 2024-25, Rao said.

Wheat:

The industry is lobbying the government to reduce the 40% tariff on wheat to enable profitable purchases abroad, something India has not done on a large scale since 2017-18. Local supplies became tighter due to large purchases by state agencies for various social welfare initiatives, and retail prices for wheat and flour increased by about 5% compared to the previous year. Chicago wheat futures are up more than 9% so far this year.

The country needs to import 2 to 3 million tonnes of grain from overseas markets this year to improve its availability in the domestic market and create a buffer, said Navneet Chitlangia, senior vice-president of the Roller Flour Millers Federation of India.

The United States Department of Agriculture’s Foreign Agricultural Service projected that India’s wheat imports would be 2 million tons for the season that started on April 1 with steady local demand.

The concerns of millers and bread makers about dwindling supplies will last for months, as the next crop will be sown in October and November, and the harvest will not begin until March 2025.

Article content

Sugar:

The world’s second-largest sugar producer has extended its restrictions beyond October. It introduced a new system in 2022-2023 and limited exports to around 6 million tonnes compared to an unrestricted 11 million tonnes a year earlier. The country has not yet announced this year’s quota.

The country has enough reserves for local consumption as well as for the shipment of 2 million tonnes this season, said Deepak Ballani, director general of the Indian Sugar and Bioenergy Producers Association. “We expect the government to allow exports as per our request,” he said.

Good pre-monsoon rainfall and an above-normal rainfall forecast this year will not only ensure comfortable supply for domestic consumption but also sustain the ethanol blending program, he said.

Article content