FAO: Indian Wheat Exports to Halve as New Food Scheme Boosts Demand

6 November 2014

India’s wheat exports could halve in 2014-15, the UN’s Food and Agriculture Organization has said – largely due to increased domestic demand for food grains under the country’s new National Food Security Act.

Overall cereal exports will also fall in the year ahead, FAO senior economist Concepción Calpe told Bridges, with rice and maize exports expected to be 20 and 33 percent lower, respectively.

2014-15 cereal exports are due to drop to 13.7 million tonnes – down sharply from 20 million tonnes in the 2013-14 marketing year.

However, successive good harvests and ample stocks at the global level have brought prices for food and farm goods down gradually from their heights in 2011, the FAO has also said.

“We’re in a particularly good season from a supply point of view,” FAO spokesperson and senior economist Abdolreza Abbassian told Bridges.

Higher domestic prices

Retail prices for rice and wheat are high but stable, the new figures show.

At the same time, weak export demand and new supplies following harvest have been mitigated by the start of the new government procurement programme in October, which seeks to purchase just over 30 million tonnes of rice.

A four percent increase in the purchase price of both paddy and grade A rice has contributed to maintaining prices on domestic markets, the agency said.

The price hike is nonetheless shallower than others in previous years, Calpe told Bridges.

“This suggests that the government is trying to reduce its direct involvement in the market,” she added.

Access to food

Families living below the poverty line will be able to benefit from the distribution of subsidised food grains from the government. (See Bridges Weekly, 12 September 2013)

However, high food prices are adversely affecting the ability of other poor people in some markets to access food, the FAO reported.

Poor consumers in other countries would be unlikely to be affected much in the short term by the changes in Indian wheat exports, the agency’s experts told Bridges, given that the country is not a major player on global markets for this commodity.

Stocks that are at relatively high levels will also ensure that markets are unlikely to react significantly to the news.

“Rice stocks by the end of the year are projected to decline, but still remain significantly above the government’s desired minimum buffer stock plus security reserve level,” explained FAO senior economist Liliana Balbi.

Farm subsidy data

The new market data comes as members prepare to quiz India on its farm subsidy schemes next Thursday at the upcoming meeting of the WTO’s committee on agriculture.

Members of the committee, which oversees the implementation of the global trade body’s existing rules on farm trade, are likely to ask India for more details of the agricultural support schemes it recently reported, negotiators said. (See Bridges Weekly, 18 September 2014)

Australia, Canada, the EU, Japan, Paraguay, the US, and Thailand are set to ask questions about the country’s farm support, according to documents seen by Bridges.

Trade officials nonetheless welcomed the move to clear a large part of a multi-year backlog in delayed farm subsidy reports, by tabling seven years of data in one go.

“It’s great: it finally shows engagement, some positive signs from India,” one delegate told Bridges.

Recent media reports have suggested the Modi government is contemplating far-reaching reforms to the current system for procuring and stockpiling food.

Food stockpiling controversy

New Delhi’s answers are likely to be scrutinised with particular interest, trade officials said, in part because of ongoing controversy over the extent to which WTO rules unfairly penalise developing countries that purchase food at administered prices as part of their public stockholding programmes for food security purposes.

In July of this year, India vetoed the adoption of a protocol on the WTO’s Trade Facilitation Agreement (TFA), citing slow progress in negotiating a permanent solution to the concerns it has raised in this area. The protocol is necessary in order to incorporate the TFA into the WTO’s legal framework, so that it can then be ratified individually by members in their domestic legislatures. (See Bridges Weekly, 31 July 2014)

The move has thrown into question the trade body’s ability to make progress on other negotiating issues, despite trade ministers’ instructions during last December’s ministerial conference in Bali, Indonesia to agree on ways forward on the outstanding questions under the WTO Doha agenda. (For more on the WTO discussions, see related story, this edition)

ICTSD reporting; “India’s Food Agency for Poor Pays Laborers $7,250 a Month,” BLOOMBERG, 5 November 2014.

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