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Heatwave could thwart India's wheat output, export plans

03 May 2022

Output could be 6% below initial estimate - govt note

India's wheat output looks likely to fall in 2022 after five consecutive years of record harvests, as a sharp, sudden rise in temperatures in mid-March cut crop yields in the world's second-biggest producer of the grain, reported Reuters.

The drop could curb Indian exports of the staple. Cashing in on a rally in global wheat prices after Russia invaded Ukraine, India exported a record 7.85 million tonnes in the fiscal year to March - up 275% from the previous year.

Expecting another record crop, traders and government officials saw an opportunity to export 12 million tonnes in the current 2022-23 fiscal year.

In mid-February, nearly a month before the recent hot spell, the government said India was on course to harvest an all-time high 111.32 million tonnes of the grain, up from the previous year's 109.59 million tonnes.

The government is yet to formally revise its production estimates, but an official note, seen by Reuters, said the output could fall to 105 million tonnes this year.

"Loss of production of wheat, all India basis, more or less stands around 6%, on account of shrivelling of wheat grains around 20% due to terminal heat and heat waves," the note said.

In 2022, India recorded its warmest March in 122 years with the maximum temperature across the country rising to 33.1 degrees Celsius, nearly 1.86 degrees above normal, according to data compiled by the state-run India Meteorological Department.

"We've some initial idea but it's a little early to fully understand the extent of crop loss," said a senior government official who keeps tabs on planting and harvests.

He declined to be named as he’s not authorised to talk to the media

At this stage, no one has a clear idea about the crop size, said Rajesh Paharia Jain, a New Delhi-based trader. "It's a dynamic situation, so we will have to wait for a while to see a clearer picture," Jain said.

"Based on the production estimates issued by the government in February, we could have easily exported much more than 12 million tonnes, but it now looks like we'll be exporting around 10 million tonnes," he said.

Even with the warm weather, India's wheat exports could easily cross last year's shipments, said the government official.

But some traders are more pessimistic, with some projecting as much as a 10% drop in output.

"Dwindling supplies in spot markets are indicating a bigger drop in the production. I think production could be down 10% to around 100 million tonnes," said the India head of global trading firm, who declined to be named.

The government could restrict exports if production sank come closer to such level, he said.

Before the nearly 50% surge in global wheat prices, those paid by the state-run Food Corporation of India (FCI) exceeded world prices, making exports unattractive.

Now, private traders are actively buying wheat from Indian farmers for exports.

So far this year, FCI's wheat purchases are 38% lower than the previous year, according to official data, indicating both higher purchases by private traders for exports and some drop in crop output as well.

Local prices have gone up by 15% in some markets, said a Mumbai-based dealer with a foreign trading firm, in another potential sign of more buying for exports and tighter supply.

Source: Reuters



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