U.N. Says India Could Double Wheat Exports .

SINGAPORE--India is likely to export 4.5 million tons of wheat in the year to March 31, 2013, but has the potential to export twice as much due to a bumper harvest and lack of domestic storage space, an official with the United Nations Food and Agriculture Office said Monday.

Abdolreza Abbassian, a Rome-based senior economist at the Rome-based FAO, said in an interview that if India exports more wheat it could push down global prices.

What India does with its growing stockpile of wheat is closely watched by market participants, that include big trading companies like Glencore International AG and Cargill Inc.

In a tender last month, global trading companies, including Glencore and Cargill, submitted bids for Indian wheat that were well below global average prices. That suggests the companies expect global prices to fall if India decides to export some of its around 50 million metric tons stockpile of wheat.

New Delhi has few options but to export wheat after a good harvest and lack of storage space, or else part of the crop is likely to rot. At the same time, there are likely to be major bureaucratic hurdles to getting the exports going.

For one, the prices offered in the recent tender by global trading companies were below the price India's government paid farmers for the crop. Such a loss at a time the government is running a huge budget deficit will be hard to justify in Parliament and is likely to delay any exports.

India urgently needs to clear storage space for the latest wheat harvest and the main rice crop that will be harvested in October but no timeframe has been set to dispose of the excess stockpiles.

The government-run State Trading Corp., in a tender that closed last month, asked private Indian and global trading companies to submit bids to buy some of the stockpiled wheat. The companies offered to buy the wheat at up to $230 per ton, free on board, well below current market rates of $252-$255 per ton and also lower than the government's cost of procuring and storing the grain.

Glencore offered to export a total of 98,000 tons of wheat at around $230 per ton, officials said.

If India exports large amounts of wheat at these prices, it may reduce demand for Australian grain and put a downward pressure on global prices, said Paul Deane, a Melbourne-based economist with ANZ Banking Group. The cheapest Australia and Russian milling wheat is currently offered around $260 per ton for shipment in August.

India's weakening rupee against the U.S. dollar, which makes its exports cheaper, definitely would make the nation's wheat exports attractive, said Kaname Gokon, Tokyo-based deputy general manager at Okato Shoji Co. Ltd, a brokerage.

Global wheat prices might also come down because of the upcoming European and Black Sea region harvest, a Mumbai-based commodities trading executive said.

But hurdles remain. Analysts say India's government will have to categorize the difference between what it paid farmers for wheat and the lower export price as a World Trade Organization-compatible export incentive such as ocean freight reimbursement.

Even if India's government approves exports, the issue of such reimbursements could still prove contentious, TPS Narang, an advisor at New Delhi-based commodities trading company, Emmsons International said.

Overseas sales of 1 million tons of wheat from government stocks could translate into losses to the government of almost 8 billion rupees, Mr. Narang said.

Source : online.wsj.com