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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


02 March 2012

USDA GAIN: India Grain and Feed Annual 2012USDA GAIN: India Grain and Feed Annual 2012

India expects a fifth record wheat crop in a row, 87.5 million metric tons, on higher planted area and optimal growing conditions in major growing areas to date.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

MY 2012/13 wheat exports are forecast at 1.5 million tons. MY 2012/13 rice production is forecast at 100 million metric tons, marginally lower than the year prior record production. India is unlikely to impose export controls on rice in the near future; MY 2011/12 rice exports are likely to reach 6.5 million tons including 2.7 million tons of Basmati. MY 2012/13 coarse grain production is forecast higher at 42.9 million tons on expected higher acreage under corn and sorghum. Indian MY 2012/13 corn exports will fall to 2.2 million tons on expected strong domestic demand, versus corn exports in current MY 2011/12 estimated at 2.4 million tons. MY 2012/13 (Apr/Mar) pulse production is forecast lower at 17.3 million tons compared to the MY 2011/12 record production of 18.2 million tons on lower acreage. Pulse imports in MY 2011/12 are estimated to increase to 3.0 million. Imports are forecast to remain strong in MY 2012/13 provided international prices remain stable.

Wheat

Production:

India is heading for the fifth consecutive record wheat harvest this summer on a marginal increase in the planted area and optimal growing conditions in the major growing areas so far. Assuming normal weather conditions through harvest (April), Post currently forecasts marketing year (MY) 2012/13 wheat production to increase to a record 87.5 million tons from 29.6 million hectares compared to 86.9 million tons from 29.4 million hectares last year. The government.s preliminary 2012 wheat production estimate is higher at 88.3 million tons on slightly optimistic yield expectations as high temperature during harvest may temper yield prospects.

Above-normal 2011 monsoon rainfall coupled with the timely announcement of the increase in the minimum support price (MSP) by the Government of India (GOI) supported MY 2012/13 wheat planting. Consequently, wheat sowing was timely (October/November) under favorable soil moisture and temperature conditions in most growing areas. Wheat area has already peaked in the wheat surplus states of North India (Punjab, Haryana and West Uttar Pradesh), but there has been a marginal planting increase in Madhya Pradesh, Chhattisgarh and Bihar.

Although over 91 percent of India.s wheat crop is irrigated, winter temperatures and precipitation critically influence the yield prospects in most of the growing areas. Growing conditions so far have been favorable due to scattered rains and prolonged cool temperatures during the crop growth/early tiller stage (December-February). There have been no reports of damage due to pest and disease incidence, or weather aberration (extended cold spell). Despite favorable weather conditions so far, an early rise in temperature during grain filling stage (March), and rains/hailstorms at harvest stage (March/April) could affect the overall crop yield and quality. Consequently, Post anticipates the MY 2012/13 wheat yield nearly same as the last year.s record yield of 2.96 tons/hectare.

Indian wheat is largely a soft/medium hard, medium protein, white bread wheat, somewhat similar to U.S. hard white wheat. Wheat grown in central and western India is typically hard, with high protein and high gluten content. India also produces around 1.0-1.2 million tons of durum wheat, mostly in the state of Madhya Pradesh. Most Indian durum is not marketed separately due to segregation problems in the market yards. However, some quantities are purchased by the private trade at a price premium, mainly for processing of higher value/branded products. Farmers are increasingly shifting from durum wheat to higher yielding non-durum varieties as the durum yield is significantly lower than regular wheat.s and the government.s continued increase of MSP has reduced the price premium.

 

India: Wheat: Area, Production, and Yield

 


 

After tottering below the production linear trend line for most of the last decade, India.s wheat production has pulled above the trend line in the last two years on record planting and yields owing to government.s steady increase in MSP and favorable growing conditions. Nevertheless, wheat yields across the major growing states show large variation owing to status of irrigation facilities and technology adoption. Wheat yields in the largely irrigated traditional growing areas of the north (Punjab, Haryana and Western Uttar Pradesh) are above 4.0 metric tons per hectare, while yields in central and western states (Rajasthan, Gujarat, Madhya Pradesh, Bihar) are relatively low (around 2.0 metric tons per hectare) due to inadequate irrigation facilities, poor seed replacement rate, and low input use.

Unscientific irrigation practices and over-exploitation of ground water are increasingly causing water table depletion and soil salinity in many wheat growing pockets in north India. Depletion of irrigation water resources is likely to pressure wheat cultivation in north India in the next few years as farmers are likely to explore less water intensive crops. Most of the existing wheat varieties, which were released more than a decade ago, are showing signs of fatigue. The Indian Council of Agricultural Research (ICAR) research institutes and various state agricultural universities (SAUs) continue to develop new wheat varieties with higher yield potential and better grain qualities, largely through traditional breeding methods. Given that wheat seed production and marketing are largely done by public sector institutions, the new wheat varieties have failed to make sufficient inroads due to limited seed multiplication, distribution and extension facilities. Although Indian policymakers and scientists acknowledge that biotechnology can be a valuable tool for meeting India.s growing food needs, current biotechnology applications in wheat are limited to experimental marker-assisted breeding for biotic, abiotic and quality traits.

Indian wheat cultivation is currently facing two major threats . global warming/climate change and Ug99. The potential vulnerability of India.s wheat crop to changing climatic conditions, particularly the „earlier-than-normal. rise in temperatures at the grain filling stage (March/April), is a serious concern for the policy makers and the research community. According to some local scientists, a one-degree Celsius rise in temperature during the growing season can result in a 3-to-4 percent decrease in grain yield. Of the 29 million hectares under wheat in India, about 9-10 million hectares are prone to terminal heat stress. ICAR and the SAUs are closely researching the potential climate risks to wheat crop to develop appropriate response mechanisms and technologies to mitigate risks.

Although Indian agricultural scientists assert that the agro-climatic conditions in the major wheat belt of north India are not conducive to the spread of Ug99, the highly mutative nature of the Ug99 strain could make Indian wheat varieties vulnerable to this rust, as more than three-fourths of the wheat varieties planted in India are highly susceptible to Ug99. ICAR and the SAUs continuously survey and monitor the wheat crop for various rusts, including Ug99. ICAR is also screening newly released wheat varieties in the country as well as varieties in the pipeline against the Ug99 stem rust. Most of the local varieties, such as PBW 343, PBW 502 and HD 2687, are susceptible to Ug99. The government has been encouraging replacing the susceptible varieties with Ug99-resistant varieties like DBW 17, PBW 550, and HW 542.

Consumption:

Wheat consumption in MY 2012/13 is forecast to increase to 85.0 million tons on sufficient domestic supplies (record production and large government stocks) and expected higher supplies of government-held subsidized wheat through the Public Distribution System (PDS) as the government prepares to launch the proposed National Food Security Bill.

Wheat consumption in MY 2011/12 is estimated at 83.1 million tons, about two percent higher than last year due to higher government wheat sales under the PDS program. In May/June 2011, the government announced an additional allocation of 5.0 million tons of food grains to below poverty line (BPL) families and 5.0 million tons to above poverty line (APL) families to the state government for distribution through the PDS. The GOI also made wheat available to bulk users and private traders at subsidized prices through an open market sale program, but the off-take has been limited as open market prices were below the government wheat sale prices in most markets, and also the sales process is considered highly bureaucratic and cumbersome by the private trade. Nevertheless, provisional official estimates indicate that total sales of government wheat during April 2011 through January 2012 was about 20 million ton, about 7 percent higher than last year.s off-take during the comparable period.

With the Indian economy growing steadily and the middle class expanding, Indian households are diversifying their consumption pattern with the inclusion of high-value and higher-protein items, like fruits, dairy products, meat, and processed foods in the consumption basket. Recent National Sample Survey Organization surveys indicate that per-capita consumption of wheat at household levels (mostly wheat flour) has been relatively flat over the last decade (see Table 3). Wheat consumption in India is mostly in the form of homemade chapattis or rotis (unleavened flat bread), using custom milled atta (whole wheat flour). However, branded and packaged wheat atta marketed by large food companies is gaining market share in urban areas due to convenience. Some wheat is also used for various wheat-based processed products like bread, biscuits and other bakery items and their share is rising.

There are about 1,000 medium to large flourmills in India, with a milling capacity of around 24 million tons, which manufacture mostly maida (flour), semolina, and residual flour to cater to institutional demand. However, the average capacity utilization by these mills is only around 50 percent, processing about 12 million tons wheat every year. Typically, whole wheat is distributed through the public distribution system to be subsequently custom milled by the household for home use. The balance of production not marketed by farmers, after retention of some quantities for seed use for the next season, is custom milled mostly in the chakkies (small flour mills). Small quantity of wheat, mostly spoiled or of inferior quality, is also used for animal feed. Market sources report increased usage of wheat in the last two years due to relatively low wheat prices and higher leakages from the government PDS system.

Government Procurement and Food Subsidy Swell

Riding on back-to-back record harvests, and a steady increase in the government.s support price over the last few years, government food grain procurement has mounted. Government wheat procurement in MY 2011/12 leapt to a record 28.3 million tons, nearly 26 percent higher than last year. Record production and higher MSP are likely to fuel the MY 2012/12 wheat procurement further to over 32.0 million tons. The Food Corporation of India (FCI) and state governments are facing a shortage of storage capacity due to substantial procurement of food grains since 2008/09, particularly in the major procuring states of Punjab and Haryana. With FCI.s current covered storage capacity estimated at around 30.0 million tons, large quantities of wheat have been kept open under Covered and Plinth (CAP) storage, especially during (May-July) and after (August-December) the procurement period. Market sources report that last year over one million tons of wheat was stored in the open without CAP storage. Storage under these conditions results in significant losses due to rains, temperature fluctuations, rodent/pests and pilferage.

The government sales price of wheat under PDS programs has been unchanged since July 2002, while the support price paid to farmers has jumped by about 83 percent in the past seven years which has raised the government.s cost price to Rs. 16,960 ($346) per ton in 2011/12. Rising procurement costs without an increase in sales prices is pushing up the GOI.s food subsidy spending, which is budgeted at Rs. 606 billion ($12.4 billion) in Indian Fiscal Year (IFY) 2011/12, and is expected to increase further in IFY 2012/13 due to higher costs (higher MSP, storage, interest, etc costs) and larger off-take of wheat under PDS.

The GOI has embarked upon enacting an ambitious National Food Security Act (NFSA) that will provide a statutory framework for entitling certain minimum quantities of food supplies to specified beneficiary families at subsidized prices by the government. On December 22, 2011, the government submitted a heavily debated Food Security Bill to the Parliament that proposes to create a legal entitlement to subsidized food grains for 63.5 percent of India.s population, including 75 percent of rural and 50 percent of urban dwellers (See IN1213). The bill if approved in its present form will enhance the government.s food grain deliveries under the PDS to nearly 64 million tons from the current legal entitlement of 39 million tons, and inflate the food subsidy bill to about Rs. 1 trillion (approximately USD 20 billion) in Indian fiscal year (April/March) 2012/13 compared to the current estimated outlay of Rs. 670 billion ($14 billion) in IFY 2011/12. The bill could not be taken up in the last parliamentary session, but has gone to a standing committee for further review before being introduced for passage in a future parliamentary session. While a section of the ruling government seems to be pushing for an early implementation of the proposed law, it may take some time for the government to get parliamentary approval and eventually to implement it. However, the government can also explore the option of phased implementation of the proposed act in selected states before the bill is passed by the Parliament.

Market Price Steady on Sufficient Supplies

Despite the government allowing exports of wheat in September 2011, the domestic market has been largely insulated from global price movement due to government.s MSP procurement and PDS distribution operations. Market prices during CY 2011 have moved in a narrow range (see Table 4) as the government has ensured steady supplies from government stocks during the second half of calendar year 2011. Despite relatively weak international prices, domestic prices during the last quarter of the CY 2011 were steadied by the government.s announcement of raising the MSP for the upcoming season. Despite the expectation of another record crop, current wheat prices are around Rs. 11,500-12,800 ($235-260) per metric ton in major markets. Market prices during MY 2012/13 are expected to remain steady in a narrow range around the MSP (Rs. 12,850 per ton) on sufficient domestic supplies and expected weak export off-take. However, domestic prices will respond if there is a significant upward movement/flare up in the wheat prices in the international market.

Trade:

In September 2011 the export ban on wheat was removed but Indian wheat exports have been small/limited due to uncompetitive prices and quality issues. Assuming the current export price parity for Indian wheat vis-à-vis other origins, MY 2012/13 wheat exports are forecast at 1.5 million tons, mostly limited to private exports to neighboring Bangladesh, Middle East, Africa and South Asia. Despite forecast record production, expected strong government procurement at high MSP is likely to keep the domestic prices firm. While the government will be under tremendous pressure of inadequate warehouses/storage facilities for the new wheat crop procurement, the cost of government wheat is prohibitively high ($346) compared to current international prices. The government is unlikely to subsidize exports of government wheat due to local political and World Trade Organization commitment concerns. However, wheat export prospects can improve if there is a significant increase in global wheat prices. While actual export volumes will depend on the competitiveness of Indian wheat during the marketing year, India has sufficient domestic supplies to export 5-6 million tons of wheat, especially if the government allows export of government wheat in case international prices exceed total cost.

MY 2011/12 wheat exports are estimated at 700,000 tons as Indian wheat has not been very price competitive in the international market since exports were allowed in September 2011. Market sources report that due to the considerable delay in the decision to allow export of wheat, India could not take advantage of high global wheat prices in the early part of MY 2011/12. Global wheat prices had eased significantly by the time the government announced removal of the export ban on wheat. While the official trade figures are not available, market sources report that wheat shipment through mid-February is estimated at about 540,000 metric tons, including 75,000 metric tons of wheat shipped to Afghanistan under a government-to-government donation. Currently, some Indian wheat is being shipped in containers, mostly to Middle East and South Asian countries. In addition, wheat product shipment is estimated at 60-70,000 tons (wheat equivalent), mostly wheat flour. At the current pace of exports, MY 2011/12 exports are estimated to reach 700,000 tons.

Despite the continuation of the zero import duty policy, opportunities for imports of wheat into India since MY 2011/12 have been precluded as the imported wheat is relatively costlier to local millers vis-à-vis local wheat after accounting for the shipping, clearance and inland transport costs.

Stocks:

Due to record government wheat procurement in MY 2011/12, government-held wheat stocks on April 1, 2012, are forecast higher at 18.5 million tons compared with 15.36 million tons on April 1, 2011. Thus, MY 2011/12 ending stocks are nearly three times the government.s desired stocks of 7 million tons (4.0 million tons buffer and 3.0 million tons of strategic reserve). With government wheat procurement likely higher at 30.0 million tons, government wheat stocks on July 1, 2012 could cross 40.0 million tons compared to the previous record stocks of 38.9 million tons on July 1, 2001. MY 2012/13 ending stocks are forecast higher at 19.5 million tons despite expected higher off-take under the PDS as higher total cost of government wheat will limit open market sales. Estimates of privately-held wheat stocks are not available, but are expected to be minimal. The PS&D table does not include privately-held stocks.

 

India: Wheat Stocks - Actual Vs. Desired Buffer

 


 

Policy:

The Government of India (GOI) supports research, development and extension activities for transfer of new varieties and improved production technologies (seed, implements, pest management) to farmers. ICAR conducts wheat research and development at the national level, which is complemented by state agricultural universities, regional research institutions, and state agricultural extension agencies at the regional and state levels. The central and state governments also support farmers by subsidizing input supplies and agricultural credit at affordable prices.

In 2007, the government launched a National Food Security Mission (NFSM) (http://nfsm.gov.in/) to address food security concerns due to the slowdown in the growth of food grain production in the last decade (2000). The NFSM aims to increase the country.s wheat, rice, and pulse production by 8, 10 and 2 million tons respectively by the end of the 11th Five Year Plan (2011/12) to ensure food security. Given that further growth in area under wheat is limited due to inadequate irrigation resources and competition from other crops, the NFSM seeks to bridge the yield gap through promotion and dissemination of improved technologies . seed, integrated nutrient management, integrated pest management and resource conservation technologies-particularly in the western and central states. India.s forecast production estimate for crop year 2011/12 (July-June) shows that the NFSM has been successful in meeting the target in wheat, and the government is likely to continue with the program in the upcoming 12th Five Year Plan.

Besides the NFSM, other targeted programs like Integrated Cereals Development Program, the National Agriculture Development Program (Rashtriya Krishi Vikas Yojana) and Special Program to Bring the Green Revolution to Eastern India are being implemented by GOI through the state governments.

The GOI establishes a MSP for wheat on the basis of recommendations by the Commission for Agricultural Costs and Prices (CACP). Government parastatals like the Food Corporation of India (FCI) and various state marketing agencies have the mandate to procure wheat at the MSP for central government stocks. Subsequently, the government allocates wheat for distribution through the public distribution system and welfare schemes at a subsidized price. In years of surplus procurement and stocks, the government sells wheat in the open market to the private trade at market prices. The government policies relating to the MSP for essential agricultural crops and the price for the PDS supply serve the twin objectives of providing remunerative prices to farmers and affordable prices to poor consumers.

The government revoked the ban on futures trading in May 2009, which had been imposed in February 2007. Since 2007, the GOI has permitted states to impose stock limits on private trade of wheat under the Essential Commodities Act. Since 2008, the government has asked large food companies and trading companies operating in India to declare their stock levels.

On September 9, 2011, the GOI removed the ban on exports of wheat, which had been enforced since February 2007, with some exceptions . occasionally allowing exports to countries like Nepal, Bangladesh and Afghanistan on humanitarian grounds. The government also permits an export quota of 650,000 metric tons of wheat products (not whole grain wheat) during a marketing year. Currently, wheat imports by the government and private trade incur zero import duty. The government lowered the duty on wheat imports to zero in September 2006 for a short period and this was subsequently extended indefinitely in October 2007. The GOI.s phytosanitary requirement pertaining to the 31 specified quarantine weed seeds (wheat sample drawn from a single consignment not to contain more than 100 quarantine seeds per 200 kg sample) and other SPS issues have effectively barred U.S. wheat shipments to India.

Rice

Production:

Assuming normal 2012 monsoon rains (June-September) and weather conditions, Post forecasts MY 2012/13 rice production at 100 million tons from 45.0 million hectares, marginally lower than the estimated MY 2011/12 record production of 102 million tons. Relatively stable paddy (unmilled rice) prices and record yields in MY 2011/12, and the GOI.s continued emphasis on rice production through the NFSM should encourage farmers to plant rice next year. However, there will be a shift in area out of long-grain Basmati rice in north India (Punjab, Haryana and western Uttar Pradesh) as farmers realized relatively low prices on bumper production and weak demand by rice millers who were carrying large carryover stocks from MY 2010/11. The government.s continued focus on expanding the gains of the Green Revolution in the rice growing regions of eastern India through promotion of hybrid rice cultivation, intensification techniques and other modern production techniques will support a MY 2012/13 near-record production forecast, provided 2012 monsoon rains are timely and normal in volume and distribution.

MY 2011/12 rice production is estimated at a record 102 million tons from 45.2 million hectares. Sufficient and well distributed 2011 monsoon rains and overall favorable weather conditions supported a higher kharif (fall/early winter harvested) rice crop in the major rice belt. Although the area planted to rabi (winter planted, spring harvested) rice is provisionally estimated marginally lower compared to last year, sufficient soil moisture and irrigation water availability due to good 2011 monsoon should support a good harvest. The government.s recently released second advance estimate also place MY 2011/12 rice production marginally higher at 102.7 million tons (90.2 million tons kharif and 12.6 million tons rabi), but these estimates are subject to future revisions.

Rice is one of the most important food crops of India, contributing to about 40 percent of total food grain production. Rice is predominantly a rain-fed crop, except in the states of Punjab, Haryana, Uttar Rice, Milled Pradesh and Andhra Pradesh, where a significant share of the crop is irrigated. Most rice is planted in the kharif season after the onset of monsoon in June. However, there is a small rabi crop taken in the states of West Bengal, Andhra Pradesh, Orissa and Tamil Nadu. Use of high-yielding seed varieties is largely confined to the states that use irrigation. Fertilizer application at the national level is not high, but is near optimum in these states.

 

India: Rice Area, Production, and Yield

 


 

Although rice production has also shown a steady upward trend, production is subject to wide year-on-year fluctuations (compared to wheat), as a significant portion (42 percent) of the crop is not irrigated. Experts report that the rice growing area has hit a plateau at 45 million hectares, leaving yield improvements as the way to expand production and meet demand from the growing Indian population. Indian rice yields are below the world average, implying potential for increased production. There is wide variation in the levels of rice productivity among the major producing states in the country, and immense scope for increasing productivity by expanding assured irrigation facilities in many states. The government is also focusing on developing appropriate technologies to enhance rice productivity under rainfed conditions. In 2010/11, the government launched a Special Program to Bring the Green Revolution to Eastern India by promoting the Green Revolution and other improved technologies to the eastern region of the country comprising Bihar, Chhattisgarh, Jharkhand, eastern Uttar Pradesh, West Bengal, and Odisha.

Some of the surplus rice growing states with the intensive rice-wheat or rice-rice cropping systems are facing severe environmental concerns, such as declining soil health and falling water tables. However, a significant cropping shift is not imminent in the near future due to the government.s continued emphasis on rice-wheat production for food security reasons and a lack of more profitable crop rotation alternatives. The government is promoting “System of Rice Intensification” technology in some rice growing states, which requires less water and chemical fertilizer. Indian rice cultivation also faces the challenge of climate change as a significant share of rice production is produced in coastal regions, which are susceptible to a rise in the sea level. Finally, glacier melting and possible aberrations in the monsoon rain patterns may affect the rice crop in the mainland.

Long-Grain Basmati Rice: India.s long-grain Basmati rice production has been growing strongly after the introduction of the PUSA 1121 variety, an evolved high-yielding variety, grown mostly in Punjab, Haryana and western Uttar Pradesh. Although no official figures are available, industry sources report Basmati rice production in MY 2011/12 at 5.8 million tons from 1.8 million hectares, about 20 percent higher than last year in response to higher prices vis-a-vis the MSP for common rice varieties. Record Basmati production coupled with low demand from the rice milers led to a strong decline in Basmati paddy prices paid to farmers, so farmers are expected to move away from Basmati rice in the upcoming MY 2012/13 season. Consequently, Basmati production in MY 2012/13 is forecast to decline to 4.5 million tons from 1.5 million hectares.

Hybrid Rice: Despite various government promotion programs, area under hybrid rice is estimated at only 1.5 million hectares in 2011/12, mostly in eastern India: eastern Uttar Pradesh, Bihar, Jharkhand, and Chhattisgarh. There are about 46 varieties of hybrid rice, of which 26 are popular in the market. The major challenge facing hybrid rice seed producers in India is the inability to cater to the vast diversity in consumer preference for rice, low incremental yields, and irrigation and chemical input use requirements over traditional varieties. Additionally, farmers face marketing problems due to reported low milling rates and poor cooking quality of hybrid rice vis-à-vis popular varieties. Nevertheless, several private seed companies and public sector institutions are involved in developing better hybrid seed varieties, which should accelerate hybrid rice adoption by Indian farmers. The National Food Security Mission has set a target to cover 3 million hectares of rice area under hybrid rice by the year 2011-12 in order to achieve the objective of increasing rice production by 10 million. Efforts are underway, mostly in the private sector, to develop transgenic rice varieties and hybrids to incorporate resistance to various pests, diseases and abiotic stresses. However, approvals and commercialization of transgenic rice are still years away.

Consumption:

Rice consumption in MY 2012/13 is forecast higher at 96 million tons compared to 94 million tons in MY 2011/12 on expected sufficient domestic supplies and continued higher sales of government rice through the PDS. Due to relatively tight domestic supplies and consequent higher market prices in MY 2009/10, the government released additional rice from its stocks for distribution through the PDS at subsidized prices and also allowed higher open market sales to private trade. With market prices easing, rice consumption in MY 2010/11 is estimated to increase to 91 million tons compared to 85.8 million tons in MY 2009/10.

Rice is the major staple food for about 65 per cent of the country.s population, and thus an important pillar for food security of India. More than 4,000 varieties of rice are grown in India to meet the varied consumer preferences. The NSSO surveys show that per-capita household consumption of rice has also been gradually going down in recent years as consumers shift to higher value foods (see Table 7).

For government procurement purposes, rice is classified into two categories - Common (length to breadth ratio less than 2.5) and Grade A (length to breadth ratio more than 2.5). Historically, most government-procured rice came from millers who mandatorily sold the government a portion of their milled rice (ranging from 75 percent in Punjab and Haryana to 50 percent in Andhra Pradesh, and even lower in marginal surplus states) at pre-established rates, called the “levy price,” which is linked to the support price of paddy plus milling costs. However, in recent years, most of the procurement by the government has been in the form of paddy bought at the support price, which is subsequently custom-milled by the government with private millers for storage and distribution through PDS.

Riding on record production and a significant increase in the MSP, government rice procurement during MY 2012/13 has been very strong. As on February 14, 2012, government rice procurement was 23.6 million tons compared to 20.9 million tons last year during the corresponding period. The total GOI procurement in MY 2011/12 is expected to cross 37.0 million tons, more than 8 percent increase over the last year.s record procurement. As in the case of wheat, the government has not increased the sales price of rice distributed through the PDS since July 1, 2002, while the MSP has been raised to nearly double in the last six years, contributing to the GOI.s increasing food subsidy budget.

Prices Steady on Sufficient Supplies

Rice prices in the domestic market have fluctuated in a narrow range (see Table 8) due to sufficient domestic supplies and higher sales of government rice through PDS. Despite substantial exports of non-Basmati rice since September, market prices have not shown any upward trend with the arrival of the record MY 2011/12 harvest. Market prices during the remaining MY 2011/12 are expected to remain steady on record sufficient domestic supplies and large government stocks that can be used to control prices, if needed.

Trade:

Assured of record MY 2011/12 rice production, „more-than-sufficient. government procurement for the PDS, and steady domestic prices, the government is unlikely to impose any export controls on non-Basmati and Basmati rice in the near future (see IN2016). Based on the current pace of exports, MY 2011/12 rice exports are likely to reach 6.5 million tons (3.8 million tons non-Basmati and 2.7 million tons of Basmati rice). Given forecast sufficient domestic supplies, India.s rice exports for MY 2011/12 is forecast at 6.0 million.

Based on preliminary official trade data, India.s MY 2010/11 exports are estimated at 2.8 million tons compared to 2.08 million tons last year (exports were mostly Basmati rice as non-Basmati rice exports were banned during the period). After the government lifted the ban on exports of non-Basmati rice in September, Indian non-Basmati rice became very competitive in the global market. Market sources report that India shipped about 2.2 million tons of non-Basmati by the end of January 2012, mostly to Bangladesh, African, Middle East and some South Asian countries. Exports in CY 2011 through October were significantly higher at 2.8 million tons (see Table 9), nearly 1 million tons higher than last year during the same period. With reports of strong exports of non-Basmati rice in November and December, CY 2011 is estimated to reach 4.2 million tons.

Stocks:

Following strong rice procurement in the ongoing MY 2011/12, government-held rice stocks on February 1, 2012, expanded to 31.8 million tons compared to 27.8 million tons at the same time last year. Government stocks are projected at 21.5 million tons on October 1, 2012 (MY 2010/11 ending stocks), compared to 20.4 million tons on October 1, 2011. There is no published information, official or industry, about the privately held rice stocks. Industry sources report privately held MY 2010/11 ending stocks were around 3.1 million tons and will be around the same level at the end of MY 2011/12. The rice PS&D table includes both government stocks and estimated privately held stocks. 

 

India: Rice Stocks - Actual Vs. Desired

 

 


 

Policy:

The government follows the same production policy for the two most important food crops – rice and wheat. Additionally, the GOI, with the support of state governments, has undertaken various rice-specific development schemes like the Special Rice Development Program (SRDP), NFSM, Promotion of Hybrid Rice, etc. The government also undertakes the domestic price support, procurement and distribution program in rice similar to wheat. Concerns about price inflation led to the GOI to ban futures trading in rice as of September 2007.

Back-to-back bumper rice production, “more-than-sufficient” government food grains stocks, and relatively weak domestic prices prompted the government to remove the export ban on non-Basmati rice from September 9, 2011. The ban on non-Basmati rice had been in effect since September 2007, except for some ad-hoc exceptions to some countries on humanitarian grounds. Exports of Basmati rice continued to be allowed subject to a minimum export price (MEP), which is currently $900 per ton.

In March 2008, the GOI removed the import duty on rice. The zero duty is currently effective through March 31, 2012, although there has been no importation of rice in the recent past.

February 2012

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