Global Markets: Wheat – Indian Exports Resume Amid High Global Prices

Wheat heads. Photo: Oklahoma State University

As major exporter prices rise, India wheat exports are returning to the global market in a sizeable way for the first time in several years. India’s ample supplies are poised to reach additional markets as stocks tighten among many of the top exporters.

India’s domestic support programs have a history of periodically expanding wheat production and burgeoning government-held stocks. In addition to supporting production, India also subsidizes domestic consumption, supplying most of its population with heavily discounted grain rations.

This year, wheat consumption has risen sharply with additional allocations of wheat through programs intended to address the economic challenges stemming from the COVID-19 pandemic. Yet even with record consumption, stocks remain at record levels, primarily held in government grain reserves.

Several years ago, when stocks in India reached burdensome levels, relatively high Russian export prices opened opportunities for India to supply not only Asian but also Middle East markets. However, since 2016/17, the high domestic support prices have been reflected in high export prices, limiting India exports to primarily neighboring countries.

In recent months, Indian export prices have eased while prices for major suppliers have risen. Russia’s announcement of both a grain export quota and a 50 euro/ton wheat export tax sent quotes for that top exporter and other suppliers rising. This will afford India the opportunity to seize greater market share in Bangladesh and expand to additional markets.

However, the scale of exports from India is not likely to match that of several years ago, since a larger Australian crop will provide formidable competition in Southeast Asian markets.

Argentina Wheat Exports Cut on Lower Production, Logistical Challenges, and Renewed Competition

Argentina has been plagued by dry and cold conditions throughout the 2020/21 growing season, shrinking production estimates to 17.2 million tons, a 5-year low. The diminished wheat crop has significantly lowered exportable supplies, and wheat exports in the 2020/21 marketing year are projected to reach their lowest level in 5 years.

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Along with lower production, a crucial factor constraining exports is continued unrest at Argentine ports. Towards the end of 2020, various union strikes severely limited shipments of grain and other agricultural products.

Argentina’s wheat harvest begins in November and exports typically peak shortly afterwards. Argentina ships its largest wheat volumes between December and February, with approximately 20 percent of annual exports shipped during January alone. However, due to labor disputes affecting shipping capacity, Argentina only exported 900,000 tons of wheat in December, down 60 percent year-over-year.

By the first week of 2021, agreements were reached with the striking unions after nearly 1 month of unrest. Traders were hopeful that these resolutions would end port disruptions and allow for strong wheat exports in January to make up for a disappointing December.

However, on January 15, a trucker’s union began blockading roads surrounding key Argentine ports, further disrupting grain exports. Port loading data suggests that strikes continue to limit wheat shipments. The country loaded 1.7 million tons of wheat for shipment in January, only half of last year’s volume.

With the labor disputes also affecting soybean and corn exports in December, competition for shipping capacity at the ports will intensify over the next few months, further challenging wheat exports.

Argentina wheat must also compete with Australia wheat in foreign markets. With Australia’s larger supplies and price advantage in 2020/21, Argentina faces renewed competition for market share in Southeast Asia. Last year, Argentina loaded 1.4 million tons of wheat for Indonesia in the month of January, compared to 100,000 tons this year.

Given these challenges, 2020/21 trade year exports (Jul-Jun) are lowered to 11.0 million tons, while local marketing year exports (Dec-Nov) are reduced to 11.5 million tons. To achieve these forecasts, Argentina must export wheat during its typically slower months between March and November.

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