From the FT blogs
India’s wheat shortage, sorry, surplus
It’s a country struggling to deal with widespread and persistent hunger. Yet India has too much wheat.
As stockpiles fill the country’s storage facilities, a panel of senior ministers will meet on Thursday to decide whether India – the world’s second largest producer of wheat – should increase exports to run down inventories.
The problem is that a bumper harvest is expected and India’s storage facilities are already piled high.
On February 1, the Food Corporation of India had 30.7m tonnes of wheat in central pool storage, up from 23.4m tonnes a year earlier. Compare that with theFCI’s total storage capacity which was reported at 33.6m tonnes on April 1, 2012.
“We don’t have much space for storage”, Anuj Gupta, an analyst at Angel Broking, told beyondbrics. “So the government is expected to raise exports by 5m tonnes this year, bringing total exports to 9.5m tonnes.”
On the consequences for wheat prices, Gupta added: “The global price is very high and in India prices are low. It is arrivals season in March and April, so prices in India won’t increase now. But after that we expect the price of wheat in India to go up as we think the government is going to say exports go up.”
Additional exports from India will add to an influx of supply on global markets that is already expected to bring prices down. Argentina has relaxed quotas to allow 5m tonnes to be exported in the 2013-14 fiscal year. And recent snow storms have relieved the Great Plains region of the US from drought, so production should improve there as well. Wheat futures prices have already fallen as a result.
One big issue the panel will face on Thursday is whether India’s infrastructure can keep up with such a large hike in exports. The FCI moved 15.5m tonnes of wheat by road and rail in the 2011-12 year. Having to transport an added 5m tonnes to ports will mean a significant step up for a transport system that is already struggling to cope.
Just how much it struggles can be seen in the number of Indians going hungry: 43.5 per cent of children under five in the country are underweight. That’s shocking enough on its own and especially so when you compare it with the situation in sub-Saharan Africa, where 23 per cent of under-fives are underweight. Wheat provides half the calories and protein requirement for a vast majority of Indians, according to a report on the Indian market by the government of Western Australia. And India has more wheat than it knows what to do with.
Why can’t India feed its people? The issue seems to be logistics rather than production.