Mumbai, Sept 29 It is becoming increasingly clear that rice output during kharif 2009 is set to decline drastically because of lower acreage of paddy planted.
The Agriculture Ministry’s admitted position is that the decline in acreage is about six million hectares.
At an average of two tonnes of rice yield a hectare, the kharif production of rice is sure to be lower by 12 million tonnes, give or take 10 per cent.
This much is clear.
Assessment reports
Yet, there is reason to believe, the Government is waiting for crop assessment reports from States, and will take a view on making up for the loss of rice through wheat imports after the rice crop size crystallises.
If Krishi Bhawan believes output estimates from the States may provide a more positive picture, it could be mistaken. Hoping against hope or extreme caution is not warranted in the current and emerging situation. Whether the rice crop is going to be 10 million tonnes short or 12 million tonnes short is slightly less relevant today.
The world wheat market - especially speculation in the futures market - is not going to wait for the Indian Government to leisurely do its number crunching.
Once it becomes clear - and to be blunt, it is already reasonably clear - that the Government would be forced to look for supplies from abroad, prices are not going to remain stable, but surely move up.
The latest assessment of world wheat crop from the London-based International Grains Council is still consumer-friendly.
Output estimate
For 2009-10, world wheat output is estimated at 666 million tonnes and world consumption at 643 million tonnes, leaving a higher level of ending stocks.
This market surplus is reflected in current prices of around $200 a tonne. But this cushy situation can change rapidly if India’s plight is officially accepted and becomes more widely known.
Even as Krishi Bhawan waits for rice crop estimate, what is critical is the assessment of planting prospects for the upcoming rabi season, especially for wheat.
Based on India Meteorological Department’s latest rainfall data, a substantial part of the traditional wheat belt is still reeling under deficient moisture conditions.
It is far from encouraging for large-scale rabi planting of wheat, pulses, oilseeds and other crops.
Of course, one is not sure how the weather will pan out in the last quarter of the calendar year; but the current situation is less inspiring.
Import scene
It is for this reason that it may be prudent to plan for wheat imports when prices are friendly to importers. Commodity prices change rapidly based on expectations. Indian policymakers’ dithering on imports usually costs the nation huge amount in terms of higher international prices.
We saw what happened in sugar. As a first step, the private trade should be allowed to import wheat.
Whether the actual user condition should be imposed needs to be debated.
A view on allowing public sector enterprises may be taken when more clarity is available on the prospect of next wheat crop and the outlook becomes clear.
That may be sometime in late November. To ensure orderly arrivals, phyto-sanitary restrictions in place will have to be suspended for some time.
It may be necessary to closely monitor contracting, physical arrivals and even disposal of imported wheat. The Government, in any case, is free to restrict imports should the situation demand.
In what currently seems to be an unlikely event of Indian wheat crop turning out to be normal or even near normal, the commercial risk of wheat imports is on the private trade.
Import of 2-3 million tonnes during the next six months will prove beneficial from the point of view of additional supplies and reining in open market prices.
Source : Business Line