Increasingly affluent population is demanding more grain-based foods.
India is the world’s second most populous country with a rate of growth that is rapidly making it one of the biggest economies in the world. Its grains sector reflects that with increasing demand from an increasingly affluent population.

According to the most recent International Grains Council (IGC) figures, India’s total grains production in 2016-17 will be 136.2 million tonnes, up from 124.6 million the year before.

India’s wheat production for 2016-17 is forecast at 93.5 million tonnes, up from 86.5 million the previous year. There’s been a good start to the following season.

“While seeding in India started quickly, there were reports of subsequent delays following the demonetization of certain bank notes, with some farmers unable to pay for inputs, including seeds,” the IGC said. “After heavier monsoon rains, reservoir water availabilities were estimated to be improved y/y, albeit slightly below the 10-year average.”

India’s maize production in 2016-17 is forecast at 25 million tonnes, up from 21.8 million the year before.

India is an important producer of sorghum, with its 2016-17 crop forecast at 5.5 million tonnes, up from 4.4 million tonnes.

India’s total imports of grains are put at 3.4 million tonnes in 2016-17, up from 1.8 million the year before. Exports are put at 1.1 million tonnes, down from 1.4 million the year before. India’s imports of wheat are set to jump to 3 million tonnes, from just 400,000 the year before.

“Based on the most recent official production estimate, the carryover in India is seen contracting to an eight-year low of 13.7 million tonnes (14.5 million),” the IGC said. “This is well above the government’s food grains stocking norm of 7.5 million tonnes as of April 1, 2017. However, by the beginning of October 2016, centrally held stocks were already only fractionally above the official stocking norm for that date. Strong buying by private traders is reported to have curtailed government procurement of the 2016-17 crop, which restricted the size of this season’s official reserve.

“In addition, private sector purchasing from government stocks has been high, leading to a quicker monthly drawdown than usual and suggesting open market supplies are becoming tight. Because of this, some local analysts believe the official 2016-17 production estimate of 93.5 million tonnes could be overstated by as much as 6 million to 10 million. Based on recent levels of offtake, centrally held inventories could be close to minimum stocking norms by the end of the marketing year.”

At the same time, exports of wheat are set to fall to 300,000 tonnes, from 800,000.

Indian maize exports are set to rise to 700,000 tonnes from 500,000. The country also is set to export 50,000 tonnes of sorghum, down from 63,000 the year before.

India’s rice production is expected to rise to 107.5 million tonnes in 2016-17 from 104.3 million the year before.

“In India, timely and well-distributed monsoon precipitation was beneficial for the nation’s summer sown (kharif) outturn, while also recharging supplies for winter (rabi) seeding,” the IGC said. “Together with attractive minimum support prices, prospects for the country’s winter-seeded (rabi) crop appear positive.”

India is likely to be the biggest supplier of rice to the world’s market for the sixth consecutive year in 2017, shipping 10.7 million tonnes, compared with 10.3 million in 2016.

Production of soybeans in India is set to increase to 11.5 million tonnes in 2016-17, up from 8.6 million the year before. The IGC commented that sowings were little changed, but an improved monsoon increased the potential yield.

Consumption grows

Earlier in 2016, the attaché forecast a recovery in 2016-17 wheat consumption to 87.5 million tonnes from 86 million the year before as population grows by around 1.6% a year.

“Despite relatively tight domestic supplies, the government is likely to continue the sale of wheat at subsidized prices through the public distribution system (PDS), but the sale of wheat to local millers through the Open Market Sales Scheme (OMSS) are likely to come down from last year’s level on relatively tight government stocks,” the report said.

“Typically, whole wheat is distributed through the open market and public distribution system to be subsequently custom milled by the household for home use.”

Much of the wheat retained for farmers is also milled, in small flour mills called chakkies.

“Some of the open market wheat and government wheat is procured by the organized milling sector for producing wheat flour for the hotels, restaurants and institutional sector and a small share for branded and packaged wheat flour and atta,” the report said. “The organized milling sector is relatively small with about 1,000 to 1,100 medium to large flour mills in India, with aggregate milling capacity of about 25 million tonnes, mostly milling maida (flour) and semolina to cater to institutional demand, and byproduct bran flakes used as filler in the cattle feed industry.”

The report put the average capacity utilization of those mills at around 45% to 50%, processing 12 million to 13 million tonnes of wheat a year.

A more recent report explained the government’s moves to make more imported wheat available. At the same time, the attaché raised the USDA estimate for Indian wheat consumption to 92.4 million tonnes.

“On Dec. 8, 2016, the Ministry of Finance issued a notification removing the import duty on wheat for an indefinite period,” the report said. “Earlier in September, the Ministry of Finance lowered the basic custom duty on imports of wheat from 25% to 10 % (ad valorem on CIF value) until March 1, 2017.

“Market sources report that the GOI decision to remove the import duty was due to concern about the rising domestic prices and declining government-held wheat stocks in the recent months. Domestic prices have surged over the last two months to record levels due to tight domestic markets. Due to the concerns on declining government-held wheat stocks, the government reduced wheat sales under open market sale scheme (OMSS) in recent months, contributing to the strong escalation in domestic prices. Consequently, the government removed the import duty on wheat to allow private mills to augment their wheat consumption requirement through imports.”

Effect of Demonetization

The Indian government’s recent withdrawal of large denomination banknotes triggered concerns that rabi planting operations could be affected “as farmers and input suppliers (seed, fertilizers, chemicals and fuel) faced a shortage of currency (most sales are cash based).”

“However, the government took steps to improve the cash availability to farmers like increasing the cash availability to the rural banking sector, increasing the cash withdrawal limit from the banks for farmers, allowing farmers to buy seeds from government agencies using old INR 500 notes, etc,” the attaché said. “The impact of demonetization on seed and labor purchase is limited. Most farmers reuse seeds from their last year’s crop (seed replacement rate for most crops range from 15% to 30%, except hybrid corn) and purchase whatever new seeds they want in advance before the planting operation.

“Most of the farm laborers have long working relations with the farmers and are unlikely to stop working on critical planting operations for lack of immediate payments. However, farmers can face problems in purchasing fertilizers and chemicals, but the new relaxations will help them source these inputs for the ongoing planting.”

Opposition to Biotech

The commercialization of biotech-based crops has been slow, with strong public opposition.

The attaché explained in a recent report that the only GM crop authorized is BT cotton and the only GM food product imports allowed are of soy and canola oils derived from particular genetically modified varieties.

“India’s political landscape continues to hinder the agricultural biotech regulatory system,” the report said. “Under the current administration, few new field trials have been allowed and no additional imported biotech-derived products have been cleared.”