NEW DELHI (Commoditiescontrol) – India’s wheat import from Australia is expected to increase as the flour millers of the port town will get good margin now because international prices of wheat is low and government of India has slashed import duty from 25 percent to 10 percent.
But news related to frost condition in Western part of Australia may be worrying for importers and suppliers as well. Frost would be the biggest threat to Australia’s wheat harvest, according to international media reports.
“Western Australia, Australia's top wheat-growing state, is expected on Thursday to suffer the latest of a series of frosts, which represent a significant threat to well-developed crops, which have lost their freeze-hardiness,” said a media report.
The frost condition may impact the production as well as quality of the grain, said a market analyst. According to him, Indian flour mills buy Austrailian wheat only for its quality as Australian Premium quality of wheat contains protein levels of 13-14 percent while medium quality contains protein lelvel of 11.5 percent, said the market analyst.
The succession of frosts has dented hopes for an overall grains harvest for Western Australia which CBH, which handles the vast majority of the state's harvest, pegged in July at 140-160 lakh tonnes, potentially eclipsing the all-time high of 159 lakh tonnes set three years ago.
According to National Australia Bank, Australia’s wheat production would be at 276 lakh tonnes, an upgrade of 400,000 tonnes from its forecast last month, but well below a 281 lakh tonne estimate from Abares two weeks ago, besides the even higher forecasts that some private analysts have released.
Indian buyers have fascinated towards Australian wheat market as cost of import has declined after reduction in import duty. As per the reports, a contract has been signed for 25,000 tonnes of wheat at $210/tonne (C&F) for December shipment. However, premium quality is priced at $220-230/tonne (C&F).
“If production of wheat declines in Australia due to weather condition, prices will go up, in that case import will be a little costlier,” said a market observer.
Wheat prices have fallen this week in the domestic market current as commoditiescontrol predicted earlier that wheat prices might witness correction if import was duty slashed.
The country has already imported nearly six lakhs tonnes of wheat so far in 2016 as and it is expected to increase in near term as bulk buyers are seen interested in importing cheaper wheat from Ukraine, Russia, France and Australia. They have already signed contracts with foreign suppliers.
The USDA has already predicted that India would import 20 lakh tonnes of wheat in 2016-17.
United States Department of Agriculture (USDA) has predicted wheat production of India at 900 lakh tonnes for the year 2016-17 in its September reports while it was estimated at 880 lakh tonnnes in the previous report. The USDA has raised wheat estimates of India higher due to higher than earlier anticipated acreage (302 lakh hectares) and yields (2.98 MT/hectare).
Beginning stocks have been estimated at 145.4 lakh tonnes and imports at 20 lakh tonnes same as predicted in the previous reports. With rise in production estimates, total supply of wheat in the year 2016-17 has been raised to 1,065 lakh tonnes against previous projection of 1,045 lakh tonnes.
As per the USDA estimates, the total consumption of wheat in the country will be at 951.4 lakh tonnes. Hence, the US agency has also raised wheat consumption estimates in India as it was predicted at 931 lakh tonnes in previous forecast.
The Ministry of Agriculture (MoA) has estimated wheat crop at 935 lakh tonnes for 2015-16, private trade sources continue to estimate lower levels, in the range of 820 to 870 lakh tonnes due to continued firm domestic prices, which reflect tight domestic supplies.
To check wheat import, the government had to impose 10 percent import duty on wheat in August 2015 for the first time since 2006. This was revised on October 19,2015 and import duty on wheat was raised to 25 percent to restrict overseas buying in the wake of falling wheat prices in the international market and motivate domestic buyers to source their requirement from Food Corporation of India (FCI).
Wheat stocks with FCI were 326.38 lakh tonnes in June, 2016 which reduced to 301.81 lakh tonnes in July and 268.79 lakh tonnes in August and present stock position is at 242.45 lakh tonnes, according to the data available at FCI website. This shows that stocks of wheat in FCI warehouses have fallen sharply after the agency started selling grain through Open Market Sales Scheme (OMSS).
The Central Board of Excise and Customs (CBEC) in a notification dated September 22, 2016, reduced import duty on wheat from 25 percent to 10 percent till February 2017.
(By Commoditiescontrol Bureau; +91-22-40015533)
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