After a bumper harvest in 2012, India poised to be a new wheat-export powerhouse

Surplus Government reserves now have reached 31 million tonnes, second only to China and three times the official target levels

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Reuters / While most other major wheat growers around the world suffered from production setbacks in 2012 due to drought, India’s farmers had a banner year which has resulted in a glut of wheat supplies at state-run warehouses and export facilities.

India’s state reserves of wheat have reached 31 million tonnes the highest level in the world outside of China and three times larger than official target levels. This sets the stage for the country to emerge as a major player on the wheat export stage in 2013 and potentially make up for any shortfalls from other exporting regions.

India is the third-largest consumer of wheat in the world, and this boost in supplies puts the country’s exporters in an unusual position, as traditionally India is only a bit-part player in global wheat trade.

So far, the Indian government has raised its wheat export allowance gradually as it assesses overall crop supply prospects for 2013, with licences for 2.5 million tonnes of wheat recently issued to follow on from the two million tonnes released from state reserves in late 2012.

But with global prices remaining attractive due to the shortage of supplies out of other regions, additional flows of Indian wheat are very likely, and should hit a record by the end of 2013. Traditionally India ranks around 10th among wheat-exporting nations, but will likely move up three or four places this year.

A flash in the pan?

However, the country’s status as a major player on the wheat export stage may not last long.

Massive domestic demand levels coupled with erratic production of all major food and feed staples mean that India’s exporters may well have substantially lower levels of crop excesses to trade with a year from now.

That said, steady improvements in the country’s wheat yields have materialized over the past five years or so, which suggests that sustainable increases in food and crop production could be seen from India going forward that may secure its place as a top exporting powerhouse.

But given the relentless levels of demand for all crops stemming from its giant human and animal herd populations, the lion’s share of India’s crop output will likely remain destined for domestic users.

Still, from time to time India will emerge as a major force on the export stage in certain markets to play a critical role in plugging supply shortages, as looks likely to be the case in wheat this year.

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