India is a significant player in global food grain trade. It is the second largest producer of rice and third for wheat. Government policies have encouraged production of these two staple grains, which are forecast at record levels. Despite bumper crops, the country’s food grain trade is moving in opposite directions as the stocks situation diverges.
In response to diminishing wheat stocks, the government eliminated the import tariff on wheat in December. However, GOI reinstated the policy in March before the local harvest began. While India wheat production is up ten percent, it is not enough to meet growing food demand and replenish stocks after two poor harvests. As a result, India is forecast to be a net importer for the second consecutive year.
In contrast, the record rice crop is forecast to not only supply the domestic market but also the world as India remains the top global supplier. The rice stocks remain ample and still well above the desired buffer level, aiding Indian competitiveness. Meanwhile, second-largest exporter Thailand has held numerous auctions to reduce government-held stocks, recently pressuring their prices higher.
The relative availability of Indian food security stocks has been the key driver for food grain trading behavior. A decade ago as global food prices were escalating, the government banned exports of wheat and non-basmati rice. Stocks grew with expanding production. Exports resumed in 2011/12, and India became an exporter of both grains. Now as stock levels have diverged, India is a wheat buyer and rice seller.