India may soon cut the floor price for exports of wheat from government warehouses by 13 per cent, government sources said on Oct. 15, which could boost shipments and put downward pressure on benchmark prices in Chicago.
The move could come after state-run trading firms in the world’s second-biggest wheat producer after China earlier this month received bids lower than the minimum rate for overseas sales, the sources said.
Government warehouses are awash with wheat, with stocks at 36.1 million tonnes as of Oct. 1, substantially higher than a target of 11 million tonnes. The government also has an extra three million tonnes of wheat as strategic reserves.
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The cabinet in August allowed three government-backed trading companies to export two million tonnes of wheat at a floor price of $300 per tonne plus taxes. But in the first round of export tenders, two exporters received bids lower than $300 a tonne. That poor response has prompted the government to consider cutting the price.
“We could soon lower the price as we do not want to be seen as too rigid, but at the same time let me tell you that there is a good deal of demand for Indian wheat,” a government official involved in the decision-making process said.
The government could lower the price to $260 a tonne, said another government source.
Traders do not find the price of $300 a tonne viable.
“It is the need of the hour to reduce the price of $300 a tonne, because it is neither workable nor competitive,” said Tejinder Narang, an adviser at trading company Emmsons International.
India primarily exports wheat with 11 per cent protein content. For buyers in the Middle East, Indian wheat costs $325 a tonne c. & f., while the same variety from the Black Sea region is available at $275-$280 a tonne c. & f., traders said.
