Rain, Pests Imperil India’s Wheat Crop as Warehouses Full

By Pratik Parija and Prabhudatta Mishra – Jun 14, 2012
India, the world’s second-biggest wheat producer, risks losing more than 6 million metric tons of grain to rain and pests as the country lacks warehouses to stockpile crops that have risen to records for six years.

Wheat is kept in the open across markets in north India as state granaries are overflowing with about 82 million tons of rice and wheat, Food Minister K.V. Thomas said in an interview in New Delhi. A group of ministers will soon consider the sale of about 13 million tons of wheat and rice to the poor and in the open market at subsidized rates, and discuss steps to boost exports to create room for newly harvested crops, he said.

Efforts to draw down stockpiles may boost shipments from India, adding to global supplies and extending the biggest slide in food prices in two years as measured by the United Nations’ Food & Agriculture Organization. Overflowing granaries may hasten a plan to enact a law to guarantee food grain to 64 percent of India’s 1.2 billion people, where the World Bank says more than 75 percent of the people live on less than $2 a day.

“Grains kept unscientifically are susceptible to damage,” Thomas said yesterday. “Earlier also, some quantities were under unscientific storage, but not to this extent as seen this year. An expert team has already gone to the states to look into what has to be done so that there is no damage.”

State reserves of food grain almost quadrupled to 82.4 million tons as of June 1 after the nation harvested record wheat crops starting in the 2006-2007 season. The government, the single biggest buyer of food crops in the country, purchases grain at guaranteed rates from farmers to sell to the poor.
‘It Will Rot’

“There won’t be any problem of storage if the government distributes the food grains at reduced prices,” said Biraj Patnaik, principal adviser to the country’s Supreme Court on food issues. “It will rot after monsoon rains start if government does not act fast.”

The June-to-September rainy season typically blankets the entire country by July 15. The onset of monsoon over the mainland in southern Kerala state was delayed by four days this year, according to the India Meteorological Department.

The government will immediately evacuate about 6.6 million tons of wheat kept in the open, enough to meet Japan’s annual demand, Thomas said. Additional warehousing capacity of 15.1 million tons will be added in the year ending March 31, he said.

A rebound in global wheat production and a slump in prices have thwarted India’s efforts to boost exports after the country lifted a four-year ban on shipments in September, said Atul Chaturvedi, chief executive officer of Adani Wilmar Ltd.
‘Time Bomb’

“With rains round the corner, I think they are sitting on a time bomb with such a huge stockpile of wheat,” he said. “They have to incentivize and get rid of the stockpile through exports. Otherwise, they will ultimately end up having a much bigger problem.”

Wheat for December delivery was little changed at $6.5925 a bushel on the Chicago Board of Trade at 11:46 a.m. in Mumbai. The most-active price has gained 1 percent this year.

Wheat stockpiles climbed to an all-time high of 50.2 million tons as of June 1 from 37.8 million tons a year earlier, according to the Food Corp. of India. Rice inventory was 32.15 million tons, compared with 27.64 million tons a year earlier, it said. The stockpile also included 94,000 tons of so-called coarse cereals.

The wheat crop will probably reach 90.2 million tons in the year to June 30, up from 86.9 million tons a year earlier, while the rice harvest may gain to a record 103.4 million tons from 96 million tons, according to the farm ministry.

To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Sam Nagarajan at samnagarajan@bloomberg.net

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