Asian millers prefer Indian wheat due to lower freight costs

08 November 20213 min reading

India’s wheat exports in 2021 could quadruple from a year ago to the highest level in eight years as a rally in global prices and higher freight costs make Indian wheat lucrative for Asian buyers, two industry officials told Reuters.

Higher exports would help the world’s second biggest producer bring down record inventories and provide Asian buyers with cheaper supplies amid a rally in global prices due to limited supplies from major exporters such as Russia and Canada.

India’s wheat exports could rise to 4.2 million tonnes this year, the highest since 2013, Nitin Gupta, vice president at Olam Agro India, told Reuters. “There is good demand for Indian wheat for human consumption and feed purpose as well,” Gupta said. A Mumbai-based grains dealer with a global trading firm, who declined to be named, said exports could reach 4.4 million tonnes.

In the first eight months of 2021, India’s exports surged 887% from a year ago to 3.07 million tonnes on good demand from Bangladesh, Sri Lanka, Indonesia, Nepal and the United Arab Emirates, according to data compiled by the trade ministry. In recent deals, two cargoes of around 100,000 tonnes of Indian wheat were sold to flour millers in Indonesia, while one cargo of about 50,000 tonnes was bought by feed makers in the Philippines, one Singapore-based grains trader said.

“On C&F (cost and freight) basis Indian wheat is competitive in the Asian market,” he said. Asian buyers save $10 to $15 on freight when they buy from India rather than Russia or Ukraine, said the Mumbai-based dealer. India harvested a record 109.52 million tonnes of wheat in 2021 and state-run agencies are holding a record 51.8 million tonnes, more than double the required buffer norm.

A surge in exports has lifted Indian prices to $305 per tonne on a free-on-board (FOB) basis, compared to $260 three months back, said Gupta of Olam. “Even after the price rise Indian wheat is cheaper. Until mid-2022 exports would continue at the current pace,” he said. 

India is an erratic participant in the international wheat market. It imports wheat in low production years, and exports when local supplies are sufficient and prices are competitive. Indian wheat production has exceeded trends in the last five years on higher planting and productivity. Production is up due to the steady increase in the government’s MSP (Minimum Support Price), expansion of area planted with new, higher-yielding varieties, and generally favorable weather conditions.

Articles in News Category