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

07 August 2013

USDA GAIN: India Grain and Feed Update August 2013USDA GAIN: India Grain and Feed Update August 2013

The Ministry of Agriculture’s Fourth Advance Estimates for the Indian crop year 2012/13 (July/June), estimates record MY 2012/13 production of corn and pulses, and near record production of MY 2012/13 rice and MY 2013/14 wheat. Above normal monsoon rains have provided favorable planting conditions to most kharif (fall and early-winter harvested) crops. MY 2012/13 rice exports are raised to 10.0 MMT on improved export competitiveness due to a weak Indian rupee.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed


New Delhi

Author Defined:

General Information

Government Estimates a Near Record 2012/13 Grain Harvest

On July 22, 2013, the Ministry of Agriculture’s released the Fourth Advance Estimates for the Indian crop year 2012/13 (July/June), wherein grain production was estimated at a near record 255.4 million metric tons (MMT). While there were minor adjustments to individual crops, the estimate of total grain production was unchanged from the May 3 third advance estimate. The government estimates a near-record grain harvest (only 1.5 percent lower than last year’s record 259.3 MMT) despite a delayed and below normal 2012 monsoon and drought-like conditions in some parts of the country. The Government of India increased production estimates for rice, corn, pulses and sorghum, and lowered the wheat production estimate.

The Indian crop year 2012/13 covers grain from July 2012 to June 2013 and includes rice, coarse grains and pulse crops harvested last fall and this spring (MY 2012/13), and wheat and barley crops harvested in March-May of 2013 (MY 2013/14). The government estimates production of corn and pulses for MY 2012/13 at a record 22.2 MMT and 18.5 MMT, respectively, due to higher harvest of the rabi (harvested in March/April) season crop. Wheat production for MY 2013/14, which is marginally lower, is still a near record 92.5 MMT, despite field reports of a significant decline in yield caused by lower grain setting due to unfavorable weather during February-March (See IN3076 and IN3055) and market factors that suggest the crop is lower than the government estimate. The Review of Index Numbers of Wholesale Price in India for the month of June, 2013 reports that food price inflation in the last six months has been largely fueled by high prices of cereals (see Annexure II). Typically, the fourth advance estimates are subject to minor revisions when the final estimates for the Indian crop year 2012/13 will be released by the end of 2013.

2013 Kharif Planting Progresses under Strong Monsoon

Almost halfway through the 2013 monsoon season (June-September), rains have been well-distributed and normal or above normal across much of India. Cumulative rainfall for the week ending July 24, 2013 was 16 percent above normal, with 29 of the 36 weather subdivisions receiving normal or above-normal rains. Sufficient monsoon precipitation has augmented the water storage in the 81 major reservoirs, which are currently re-charged at 149 percent of normal storage, more than double than last year’s level.

Timely and adequate monsoon rains have provided favorable planting conditions to most kharif (fall and early-winter harvested) crops unlike last year when a late monsoon delayed planting of most crops. As of July 26, 2013, kharif planting reached 74.8 million hectares, up 18 percent compared to last year, and more than 71 percent of the normal cropped area. Monsoon rainfall during the ongoing season has been sufficient for transplanting of rice and planting of coarse grains and pulses across the country. The window of opportunity for planting kharif crops will be over by end of July for most crops, but transplanting of rice will continue in eastern and northeastern states through the end of August and early September.

Despite favorable early planting conditions, sufficient and well-distributed monsoon rains during August and September will be critical for grain production prospects. Excessive rain and consequent floods may cause crop damage in the flood-prone areas of eastern and northeastern states. Longer dry spells during the critical crop growth stages could temper yield prospects, especially in the non-irrigated areas which account for 56 percent of India’s cropped area. As of now, MY 2013/14 estimates for the planting and production of rice, corn, sorghum and millet remain unchanged, assuming normal weather conditions through harvest.


Production Raised….

Based on the latest official estimates, the MY 2012/13 estimate of milled rice production has been raised to 104.4 MMT, largely on higher than anticipated yields of rabi (winter planted/spring harvested) rice. Despite a delayed and below-normal 2012 monsoon, India harvested a near-record rice crop with a record yield (3.7 metric tons per hectare) in MY 2012/13, more than three percent higher than the previous record yield in MY 2011/12.

…. But Procurement Down

Total government rice procurement for MY 2012/13 through July 25, 2013, is estimated at 33.9 MMT compared to 34.6 MMT during the same period last year. While procurement in the northern states of Punjab and Haryana has been higher than last year, lower procurement in the states of Andhra Pradesh and Uttar Pradesh accounts for most of the decline in procurement. With procurement tapering off in the coming months, MY 2012/13 rice procurement is likely to reach 34.2 MMT, more than two percent lower than last year’s record procurement.

Despite lower procurement, government-held rice stocks on July 1, 2013, were officially estimated at 31.5 MMT compared to 30.7 MMT a year ago, and nearly three-times larger than the government’s desired July 1 stock target of 11.8 MMT. With the expectation of relatively weak procurement and stronger off take of government rice during July-September, October 1, 2013 stocks are projected lower at 22.5 MMT compared to 23.4 MMT at the same time last year.

Prices Firm

Domestic prices have firmed since April 2013 on strong export demand, with average prices in July more than 19 percent higher than a year ago. With the parliamentary election due in less than a year, the government could intervene in the domestic market through increased release of rice from their stocks to keep the prices under control.

Source: Agricultural Marketing Information Network, Ministry of Agriculture, GOI

MY 2012/13 Exports Raised

Post’s MY 2012/13 (CY 2013) rice export estimate is raised to 10 MMT on a strong surge in exports in recent months due to the depreciation in the value of Indian rupee. According to the preliminary official statistics for January-May 2013, and trade estimates for June and July, rice exports are estimated at 6 MMT.

Source: Monthly exports till May 2013 from DGCIS; GOI; June, and July 1-23, 2013, figures are derived from rice shipping data compiled from private sources, which do not break out Basmati and non-Basmati. (P)- indicates provisional figures.

There has been a strong surge in rice exports in the last three months on improved export competitiveness of Indian rice due to the decline in the value of Indian rupee (from INR 53 to per dollar on April 30, 2013 to the low of INR 60.6 per dollar on July 8, and marginally improving to INR 59.2 to per dollar on July 25). Most of the non-Basmati rice is being shipped to African countries while Iran continues to be the major buyer of Basmati rice. With forecast record MY 2013/14 production and large government-held rice stocks, the Indian government is unlikely to impose any export restrictions in the near future. Assuming the current price parity and pace of exports continue, MY 2012/13 exports are expected to reach 10 MMT.


Market Suggests Lower Crop than Government Estimate

Despite the government’s fourth advance estimate for MY 2013/14 of 92.5 MMT, market sources continue to estimate the crop much lower in the range of 82-88 MMT on reports of 5-10 percent lower yield realization compared to last year due to lower grain setting (see IN3036 and IN3055). Market fundamentals also suggest a lower crop, the following points highlight some of the recent trends that point to a lower wheat crop.

1. Government Procurement Down

Government wheat procurement ended by the third week of June, more than a month before it did last year. MY 2013/14 procurement is estimated to reach 25.1 MMT, down by 13 MMT over last year, with procurement down in most of states.

2. Traders/Farmers Holding Limited Stocks

Due to relatively weak international prices, major exporters and traders have not bought and stocked wheat for exports. While local traders and some large farmers may be holding some wheat for late season sales, they have limited capacity to hold additional quantities.

3. Additional Wheat Released for Open Market Sales

On July 2, 2013, the government announced an additional allocation of 8.5 million tons of wheat to bulk consumers (industrial users) and 1.0 million tons for private traders to be lifted from warehouses in Punjab and Haryana. The quantities will be sold through periodic tenders during MY 2013/14 at a reserve price of INR 15,000 ($254) per ton and suggest that despite low procurement, open market supplies are relatively low.

4. Domestic Prices Rule Firm

Average wheat prices were stable in the month of July and nearly 20 percent higher a year ago suggesting tight supplies. Despite the government’s announcement of a near-record wheat harvest, wheat prices marginally firmed up in the last week of July, with the spot prices in the major states ranging from INR 14, 340 ($243) to INR 16,040 ($272) per metric tons.

Source: Agricultural Marketing Information Network, Ministry of Agriculture, GOI

High open-market prices during the peak marketing season (April-July) despite expected higher open-market supplies (lower government procurement and additional allocation of wheat from government stocks) points to lower MY 2013/14 production compared to last year.

Consequently, Post continues to estimate MY 2013/14 wheat production at 87.0 MMT.

Government Stocks Ease

Government-held wheat stocks on July 1, 2013 were estimated at 42.4 MMT, nearly 15 percent lower than last year’s level. However, the government stocks are still more than double the government’s desired July 1 stock level of 20.1 MMT. Government sources report that about 18-20 MMT of new crop (MY 2013/14) and old crop (MY 2011/12 and 2012/13) wheat continues to be stored in the open (on raised plinths with plastic covers).

Exports Slacken

Government wheat exports through parastatals against the 4.5 MMT export quota have come to an end in July, and the government has not announced any additional quota. Even if a quota is established, it is unlikely that there will be international buyers for the government wheat at the existing floor price of $300 per metric tons FOB due to relatively weak international prices. The government would have to reduce its export floor price below the open market sale price which would likely by opposed by domestic users of wheat. Consequently, the government may not announce any additional export quota in the near future.

Source: Monthly exports till May 2013 from Directorate General of Commercial Intelligence (DGCIS), GOI; June and July 1-23, 2013 figures are derived from trade sources.
(P) indicates provisional figures.

The provisional figures for MY 2013/14 wheat exports through July 23, 2013, are estimated at 2.4 MMT (government-wheat 1.4 MMT and private wheat 1.0 MMT). The shipping data compiled by a private source for July 1 to 23, 2013 show a sharp decline in wheat exports, with exports in July likely to drop to 350,000 metric tons, almost half of the exports in the month of June.

Open market wheat is currently available at $280-290 FOB for exports, at which there are no buyers due to significantly lower priced wheat from competing origins. Some analysts report that Indian wheat can be competitive in the international market if the open-market wheat prices decline by more than 15 percent over current level, i.e., below the government’s purchase price (INR 13,500 ($229) per ton).

Domestic prices are likely to remain firm on forecast tight supplies in the near future, and are unlikely to fall below the government purchase price during the season. Assuming some improvement in the international market during the later part of the season, MY 2013/14 wheat exports are forecast at 5 MMT.

Coarse Grains

Production Revised Higher

According to the Ministry of Agriculture’s fourth advance estimate, total coarse grain production in the Indian crop year 2012/13 is estimated higher at 40.1 MMT compared to the third advance estimate of 39.5 MMT, with most of the increase accounted by corn. Post’s MY 2012/13 corn production has been raised to a record 22.2 MMT on higher than anticipated production of the winter planted (rabi) corn. MY 2012/13 millet production is revised marginally to 10.76 MMT and sorghum to 5.33 MMT. The MY 2013/14 barley production is estimated at a record 1.74 MMT. Consumption and stocks have been adjusted to reflect the change in the production estimate.

MY 2012/13 Corn Exports Raised

Post’s MY 2012/13 corn exports have been raised marginally to 4.9 MMT based on the latest market reports. According to the preliminary trade figures, MY 2012/13 corn exports through July 2013, are estimated at 4.2 MMT compared to 3.8 MMT for the corresponding period last year.

Source: Monthly exports till April 2013 from Global Trade Atlas; May, June and July 1-23, 2013 figures are derived from trade sources.
(P) indicates provisional figures.

Provisional shipping data show exports during July 1-23, 2013, at 386,000 metric tons, and may reach 450,000 for the month, a strong recovery after the decline in June 2013 exports (292,000 metric tons). Market sources report that improved export demand from traditional markets and the decline in the value of Indian rupee has improved export prospects. However, exports during August-October 2013 are likely to come down on tight supplies. Consequently, MY 2012/13 exports are raised to 4.9 MMT.

August 2013

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