India is the world’s second-largest producer of rice and wheat and by far the largest producer of pulses. Wheat and rice are the cornerstones of India’s food security policy. According to USDA, India is heading for its fifth consecutive bumper wheat harvest thanks to favorable weather conditions in the major wheat-growing areas. USDA forecasts 2020/2021 (April-March) wheat production at 107 million tonnes from 31.6 million hectares.
India is the second-most populous country in the world after China, with an estimated population of 1.3 billion people. With an area of 3,287,263 km², India is the 7th largest country in the world. It is the world's largest democracy and, according to UN estimates, its population is expected to overtake China in 2028 to become the world's most populous nation. As a rising economic powerhouse, India has emerged as an important regional power. But it is also tackling huge social, economic and environmental problems. After growing at very high rates for years, India’s economy had already begun to slow down before the onset of the COVID-19 pandemic. Between FY17 and FY20, growth decelerated from 8.3 percent to 4.0 percent.
India is an agrarian economy, and more than 52 percent of the land area is considered arable. It is among the highest-ranking countries in production volume for various commodities like rice, wheat, cotton, and dairy. Agriculture and related sectors such as forestry and fisheries account for 17 percent of GDP though this has been declining since 1991. Agricultural-related occupations, including those of the textile sector, account for roughly half of India’s labor market. Consequently, the agricultural sector plays an important role in Indian economics, politics and society.
The agricultural sector is witnessing a shift from traditional farming to horticulture and to poultry and dairy production. The demand for fresh and processed products of all types is increasing as the population urbanizes, incomes rise, and consumption habits change.
Wheat and rice are the cornerstones of India’s food security policy. The Indian government allocates significant funding to support research, development, and extension activities to educate farmers about new varieties and improved production technologies (e.g., seed, pest management) for these crops. Central and state governments also support farmers by subsidizing inputs (water, fertilizer, seed, power, irrigation, chemicals, and agricultural credit) for crops like wheat.
INDIAN WHEAT PRODUCTION
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. High domestic supplies will keep most foreign wheat out of the Indian market in MY 2021/2022. However, India’s growing fast food and bakery/confectionery industries are demanding specialty flours (used in pizzas and burger buns) that require different wheat classes that are not produced locally.
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.
Wheat is the preferred crop in irrigated areas in the wheat-producing states due to increases in the government’s MSP prices. Wheat is favored because of its relatively stable yields when compared to other competing rabi (winter planted) crops (e.g., corn, pulses, oilseeds, and other coarse grains). Wheat acreage consequently over the last decade has remained stable at between 29-31.6 million hectares.
Despite the back-to-back bumper harvest, the wheat crop is vulnerable to climate change, particularly the ‘earlier-than-normal onset of summer (terminal heat), and unseasonal heavy rains affecting the crop at the grain filling/maturity stages (March-April). These are concerns for Indian policymakers and researchers alike. The Indian Council of Agricultural Research (ICAR) and various state agricultural universities (SAU) are now involved in developing response mechanisms through agronomic management and technological advances in attempts to mitigate potential climate change risks.
In northern India, over-exploitation of groundwater due to flood irrigation is causing problems of soil salinity and declining water tables in the wheat-growing belts. Researchers report that farmers may be forced to switch to less water-intensive crops like corn, pulses, or vegetables soon. Northwestern wheat growing areas have also reported sporadic incidence of yellow rust in the last few years, but there has been no known incidence of Ug99, wheat rust of global concern.
Wheat is the staple food in the northwest and central India. It competes with rice in wheat non-growing regions in the south and east India. Households, local restaurants, and eateries account for about 80 percent of the wheat domestically consumed in India. Some wheat is used for processed food products such as raised breads, biscuits (cookies), and other bakery items (about 12-15 percent). There is also a small market for high-quality wheat (4-5 MMT) for western-style pasta, and baking/confectionary foods.
WHEAT MILLING SECTOR
The organized milling sector includes some 1,300 medium-to-large flour mills with a milling capacity of about 25-28 MMT, per year. Market sources report that most mills are operating at 55-60 percent of their capacity, and process about 15-16 MMT of wheat, annually. Much of the wheat produced is milled by the unorganized sector, that is, by small-scale family-owned mills.
India processes approximately 200 million tonnes of various grains and the industry employs roughly 400,000 persons. For wheat milling, traditional equipment (small stone mills called chakki) with limited capacity are used. In addition, there are roughly 800 large stone mills that account for about 15 percent of flour production. Then you have approximately 1500 modern roller flour mills with capacities in excess of say 100 tonnes a day catering to growing flour demand. These account for roughly 30 percent of flour production. These mills produce wheat flour (atta), finely milled white flour (maida) and a kind of semolina (sooji or rawa).
According to USDA, India is heading for its fifth consecutive bumper wheat harvest in the upcoming marketing year thanks to favorable weather conditions in the major wheat-growing areas. USDA forecasts marketing year (MY) 2020/2021 (April-March) wheat production at 107 million metric tonnes (MMT) from 31.6 million hectares. India will experience its second-highest harvest this season, following four consecutive record harvests. India’s wheat consumption in MY 2021/2022 is forecast at 97 MMT, higher than last year’s estimated consumption of 96.6 MMT.
Government-held wheat stocks as of April 1, 2021, are estimated at 27.3 MMT. Based on the forecast of lower production and steady consumption and exports, USDA New Delhi post’s MY 2021/2022 ending wheat stock estimate is lowered to 26.3 MMT.
India’s import duty of 40 percent precludes any major imports of wheat in MY 2020/2021. Imports of wheat and wheat products in MY 2021/2022 are forecast at 25,000 MT, mostly of western-style pastas and baking/ confectionery foods products for the high-end consumer market.
Assuming continued weak domestic prices, and the current price parity for Indian wheat with those of other origins, MY 2021/2022 wheat exports are forecast at 2.0 MMT, heading primarily to Nepal, Bangladesh, and Sri Lanka, along with wheat flour exports to traditional African and Middle Eastern markets.
Rice is India’s most important food crop, representing 40 percent of food grain production. Rice is the major staple cereal for 70 percent of the population, with the balance consuming rice with wheat or other cereals. India grows more than 4,000 rice varieties. The vast majority (90 percent) of farms are small (less than 2 hectares), and farmers retain 45-50 percent of production for their consumption (locally milled) and seed use. Most of the coarse rice production (high yielding/hybrid rice) is procured by the government, with smaller quantities purchased by private trade for exports. Locally preferred rice cultivars are procured by private trade and marketed in bulk and unbranded. A small, but growing, the share of rice is branded and marketed in consumer packaging. Long grain Basmati rice and other specialty/fragrant rice varieties are procured by millers for export, as well as for domestic sales in bulk or branded/packages.
Indian rice production has been above the trend line in the past four years due to increasing yields on favorable monsoon rains. Rice acreage has plateaued at 44 million hectares; acreage faces competition from urbanization and high-value crops. Despite production increases, agricultural experts are concerned with the sustainability of rice production in several states, including vulnerability to climate change. Several states follow intensive, rice-based cropping systems (rice-wheat or rice-rice) which are leading to deteriorating soil health, declining water tables, and the emergence of new resistant diseases/pests.
Assuming a normal 2021 monsoon (June-September 2021), USDA forecasts MY 2021/2022 rice production at 118 MMT. The rains lowered production costs by requiring less irrigation; leading to higher rice profit margins compared to other crops. An increase in the government’s MSP price for rice next year will encourage farmers to favor rice over other crops.
India has become the world’s leading rice exporter following the government’s 2011 removal of its export ban on coarse rice. Rice exports in MY 2020/2021 are estimated at a record 15.5 MMT. USDA forecasts MY 2021/2022 rice exports lower at 14 MMT on expected higher MSP driven domestic rice prices and response from competing origins.
Indian rice exports have been robust since the beginning of 2020 grounded on strong demand for non-Basmati rice to traditional markets. India has managed to maintain uninterrupted export supplies despite COVID-19 related supply disruptions.
Government rice stocks as of April 1, 2021, are estimated at 49.9 MMT compared to 49.2 MMT during the same period last year. This volume now is nearly four times the government’s desired rice stocks volume of 13.58 MMT. And rice consumption in MY 2020/2021 is estimated at 103.1 MMT, up to eight percent from last year.
COARSE GRAIN PRODUCTION
India’s coarse grain production is dependent on the performance of the monsoon as 85 percent of the acreage is unirrigated. Assuming a normal monsoon this summer, MY 2021/2022 coarse grain production is forecast at 47.6 MMT, lower than the MY 2020/2021 record harvest of 49.2 MMT, on trend yields. The MY 2021/2022 coarse grain production forecast includes 29 MMT of corn, 12 MMT of millet, 4.6 MMT of sorghum, and 1.95 MMT of barley.