India Faces Wheat Glut as Global Prices Tumble .

​NEW DELHI--India will likely be saddled with a wheat glut, worsening its storage problems ahead of the procurement season as a sharp fall in global prices has dashed its export plans and left the state with large quantities of unsold grain.

The country had emerged as a major wheat supplier over the past few months as it sought to sell excess state stocks.

But global prices have tumbled in the past week below the government-fixed minimum export price of $300 a metric ton to about $270, free on board, due to higher-than-expected supplies. The government had fixed the minimum export price based on its cost of procuring the grain from farmers.

State-run trading companies MMTC Ltd., 513377.BY +4.01% State Trading Corp. and PEC Ltd. IX2.SG 0.00% have been issuing weekly export tenders after the government said in July that they may export 4.5 million tons from state stocks.

Interest in Indian offers has been fizzling out in recent weeks due to falling global prices on the back of optimism over better output in 2013.

Over the past one month, state trading companies have been forced to cancel three to four export tenders, but a few traders have continued to buy Indian wheat due to deals committed in advance to clients.

"I think we will be unable to export about half a million tons" from the 4.5 million tons the government had cleared, said a senior executive with a state-run trading company, who didn't wish to be named.

"Last week's fall in prices may mean the interest dies down completely," the executive said. "Our only hope is that the government lowers the minimum export price."

However, officials said the chances of the government lowering the minimum export price are remote, as such as move would be politically risky since it would amount to subsidizing grain exports.

Excess stocks would only add to the pressure of storage on already-choked government granaries.

The situation will likely aggravate wastage as the government wants to procure 15% more wheat this year with an eye on pleasing farmer voters ahead of state and federal polls this year and in 2014. Government agencies have already begun wheat procurement for this year.


Source : online.wsj.com