Speculation is increasing that this season’s Indian wheat production could be much lower than last year, as less than average rainfall and higher than average temperatures threaten yields in the key winter crop regions.
After rice, wheat is the most important food-grain in India. It is the staple food of millions of Indians, particularly in the northern and north-western states of the country. India is the second largest producer of wheat in the world, after China, and in the last two years has accounted for more than 13 per cent of the world’s total production of wheat.
The area of arable land in India is just under 160 million hectares. This is more than 60 per cent of the country’s total land area and is the second largest in the world behind the United States (US). According to government sources, Indian farmers had planted 15.4 million hectares of wheat up to December 14. This is down slightly from last year’s total of 15.7 million hectares and represents almost 10 per cent of the arable land area.
The northern states of Madhya Pradesh and Uttar Pradesh are the country’s top two wheat producers. They account for more than 45 per cent of India’s total output. In the four month period from June to September this year, these two states received only 10 per cent of their long-term average rainfall. This is normally the peak monsoon period and rain in these months is critical for the succeeding winter crop production season.
Based on the monsoon, the Indian cropping cycle is classified into two distinct seasons – Kharif and Rabi. The terms come from the Arabic language where Kharif literally means autumn and Rabi means spring and refer to the harvest period for each of the seasons.
The Kharif cropping season runs from June to October each year and this is when summer crops such as rice, maize, cotton and sorghum are grown. These crops are planted with the onset of the south-west monsoon and finish when the rainy season is over.
On the other hand, the Rabi cropping season runs from October to April, when India grow their winter crops such as wheat, barley and chickpeas. The crops are sown when the monsoon ends and harvested before the beginning of the summer season.
India harvested a record 99.70 million metric tonnes (MMT) of wheat in the 2017/18 crop year. This is an increase of 1.2 per cent on the previous record set in 2016/17. However, it is substantially higher than the preceding two drought-affected years when production of only 87MMT resulted in substantial imports, particularly from Australia.
Wheat prices have reportedly risen by more than 15 per cent since the beginning of this financial year. A substantial depreciation in the value of the Indian rupee against the United States dollar has certainly contributed to this increase.
There was also some government influence in the lead up to the general election. Higher domestic prices were designed to appease disgruntled farmers in northern India where the price of key farm inputs, such as fuel and fertiliser, increase at a faster rate than the returns from farm production. But if prices go too high the government risk alienating the city folk who are forced to pay higher prices for their food.
However, fall in Indian wheat output could push domestic wheat prices even higher and force the Indian government to reduce import taxes so that local production can be supplemented with imports. Higher imports from India will, in turn, provide support for global wheat prices.
At the beginning of November reserve wheat stocks held by the government reportedly stood at just over 33MMT, up by almost 40 per cent in the last twelve months. The recent price increase may prompt the government to release some of these stocks onto the market to manage the rising price situation.
Meanwhile, after weeks of speculation, there is finally confirmed evidence of a sustained resumption of agricultural commodity trade between China and the US. The United States Department of Agriculture (USDA) reported mid-month that China had purchased 1.5mmt of soybeans.
Well, they returned to the trough again last week with a further 1.2mmt of soybean purchases. Whilst the shopping may not have finished for 2018, the total purchases to date still fall well short of trade expectations and US farmer hopes. The market reaction told the story with Chicago soybean futures down following the news.
China is the world’s largest consumer of soybeans accounting for 60 per cent of global trade each year. In 2017 they purchased 31.7mmt of US soybeans, almost 60 per cent of total US soybean exports. The story is quite different this year. Trade tensions escalated following the imposition of tariffs by the US government on a multitude of imported Chinese goods.
The big question now is ‘what will these purchases do for the delicate trade negotiations’? Stay tuned for more Don’s Party action in 2020!
After rice, wheat is the most important food-grain in India. It is the staple food of millions of Indians, particularly in the northern and north-western states of the country. India is the second largest producer of wheat in the world, after China, and in the last two years has accounted for more than 13 per cent of the world’s total production of wheat.
The area of arable land in India is just under 160 million hectares. This is more than 60 per cent of the country’s total land area and is the second largest in the world behind the United States (US). According to government sources, Indian farmers had planted 15.4 million hectares of wheat up to December 14. This is down slightly from last year’s total of 15.7 million hectares and represents almost 10 per cent of the arable land area.
The northern states of Madhya Pradesh and Uttar Pradesh are the country’s top two wheat producers. They account for more than 45 per cent of India’s total output. In the four month period from June to September this year, these two states received only 10 per cent of their long-term average rainfall. This is normally the peak monsoon period and rain in these months is critical for the succeeding winter crop production season.
Based on the monsoon, the Indian cropping cycle is classified into two distinct seasons – Kharif and Rabi. The terms come from the Arabic language where Kharif literally means autumn and Rabi means spring and refer to the harvest period for each of the seasons.
The Kharif cropping season runs from June to October each year and this is when summer crops such as rice, maize, cotton and sorghum are grown. These crops are planted with the onset of the south-west monsoon and finish when the rainy season is over.
On the other hand, the Rabi cropping season runs from October to April, when India grow their winter crops such as wheat, barley and chickpeas. The crops are sown when the monsoon ends and harvested before the beginning of the summer season.
India harvested a record 99.70 million metric tonnes (MMT) of wheat in the 2017/18 crop year. This is an increase of 1.2 per cent on the previous record set in 2016/17. However, it is substantially higher than the preceding two drought-affected years when production of only 87MMT resulted in substantial imports, particularly from Australia.
Wheat prices have reportedly risen by more than 15 per cent since the beginning of this financial year. A substantial depreciation in the value of the Indian rupee against the United States dollar has certainly contributed to this increase.
There was also some government influence in the lead up to the general election. Higher domestic prices were designed to appease disgruntled farmers in northern India where the price of key farm inputs, such as fuel and fertiliser, increase at a faster rate than the returns from farm production. But if prices go too high the government risk alienating the city folk who are forced to pay higher prices for their food.
However, fall in Indian wheat output could push domestic wheat prices even higher and force the Indian government to reduce import taxes so that local production can be supplemented with imports. Higher imports from India will, in turn, provide support for global wheat prices.
At the beginning of November reserve wheat stocks held by the government reportedly stood at just over 33MMT, up by almost 40 per cent in the last twelve months. The recent price increase may prompt the government to release some of these stocks onto the market to manage the rising price situation.
Meanwhile, after weeks of speculation, there is finally confirmed evidence of a sustained resumption of agricultural commodity trade between China and the US. The United States Department of Agriculture (USDA) reported mid-month that China had purchased 1.5mmt of soybeans.
Well, they returned to the trough again last week with a further 1.2mmt of soybean purchases. Whilst the shopping may not have finished for 2018, the total purchases to date still fall well short of trade expectations and US farmer hopes. The market reaction told the story with Chicago soybean futures down following the news.
China is the world’s largest consumer of soybeans accounting for 60 per cent of global trade each year. In 2017 they purchased 31.7mmt of US soybeans, almost 60 per cent of total US soybean exports. The story is quite different this year. Trade tensions escalated following the imposition of tariffs by the US government on a multitude of imported Chinese goods.
The big question now is ‘what will these purchases do for the delicate trade negotiations’? Stay tuned for more Don’s Party action in 2020!
Comment