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India on track for record wheat, rapeseed production

Grain Brokers Australia, December 7, 2021

Amid good seasons for kharif and rabi crops, Indian farmers have been protesting have been protesting for months against deregulation, and calling for an extension of the Indian Government’s price supports for commodities. Photo: Pressenza in English

AS THE planting of India’s rabi  crops for this season draws to a close, extremely favourable weather conditions and higher minimum support prices have seen Indian farmers increase the area planted to wheat, oilseeds and pulses. This raises the potential for record wheat production in India for the fifth consecutive year, as well as record oilseed production when the crops are harvested in their spring.

Almost three months ago, India’s Cabinet Committee on Economic Affairs approved increases to the minimum support prices (MSP) paid to farmers for their produce. The government’s stated goal is twofold: firstly, to ensure farm profitability, and secondly, to encourage diversification into pulses and oilseeds at the expense of wheat, the major rabi crop, to correct domestic supply-and-demand imbalances.

The MSP for lentils was raised by 4000 Indian rupees (INR) per metric tonne, or A$75.25/t, to INR55,000 (A$1035)/t. Rapeseed and mustard seed MSPs were lifted by INR4000 ($75.25)/t to INR50,500 ($950)/t. For chickpeas, the MSP was raised by INR1,300 ($24.45)/t to INR52300 ($984)/t. Wheat went up by INR400 ($7.50)/t, to INR20150 ($379)/t, and for barley, the increase was INR350 ($6.58)/t, to INR16350 ($313)/t.

Monsoon delays planting

This season’s rabi planting program has been delayed by a persistent monsoon that has lingered far longer than normal. According to the Indian Meteorological Department, the withdrawal of this year’s southwest monsoon was the seventh most delayed retreat since 1975. Consequently, rainfall across many of the major winter-cropping states was 50-per-cent higher than average in the three months to December 3.

Much of the increased rainfall fell in October, saturating fields and delaying preparation for winter-crop seeding. Some early sown pulse crops such as chickpeas suffered from waterlogging and poor germination, with the worst-affected fields reportedly resown to wheat.

The late-season rains delayed the wheat-planting program by a couple of weeks, but on the whole, it has benefitted from the above-average soil-moisture profile. Some fields that traditionally require irrigation prior to planting were sown without an autumn pre-water. In other regions, the increased availability of irrigation water will allow farmers to plant more wheat before the planting window closes in the   coming weeks.

The Indian government may be paying higher absolute prices to its farmers for pulses and oilseeds, but the projected net returns per hectare are still better for wheat than that of pulses and oilseeds, and the associated production risks are much lower. Accordingly, the wheat area continues to increase as farmers pursue the lower risk option.

According to the Indian Agriculture Ministry, the area sown to wheat, the main Indian rabi crop, totalled 20.07Mha across all states up to December 3. The seeding program has been completed in most regions, but the final figure is expected to be higher as the data from the late sown areas is collected in December.

This is 3.8pc higher than last season’s final planted area of 19.34Mha and augers well for this season’s production if the favourable conditions continue through to spring. Dr Gyanendra Pratap Singh, one of India’s preeminent agricultural scientists, expects wheat production could be as high as 112 million tonnes this season. This compares to the USDA’s current production estimate of 109.52Mt. Either way, it would be a record.

Wheat stocks build, oilseed area lifts

The run of good seasons in India has enabled them to build wheat stocks to such an extent that they have re-entered the export market in quite a meaningful way over the last two years. The USDA pegged 2020/21 marketing year closing stocks at 27.8Mt, 9.7pc of global ending stocks for last season, based on basis exports 2.56Mt.

In 2021-22, the USDA has India exporting 5Mt of wheat and ending stocks increasing to 10pc of the world total. If the higher local production forecast proves correct, there is an additional 2.5Mt that could be exported next year. India has reportedly sold over 2Mt of wheat for export over the December-January period alone.

As of Friday last week, the area planted to pulses sat at 11.4Mha, compared to a final number in 2020 of 11.35Mha. Like wheat, high domestic prices set the stage for above-average plantings this season, but the late monsoon has altered planting programs in some regions, reducing the final planted area.

India’s rapeseed and mustard seed production is expected to jump significantly next harvest. The country’s farmers, particularly in the northern states, responded to high domestic prices and the MSP incentive to increase their planted area. Indian rapeseed futures have risen by almost 40pc this year, hitting a record INR8850 (A$1676)/t in October, just as the planting campaign commenced.

As of December 3, the total area planted to oilseeds was up 29.4pc, from 6.47Mha to 8.37Mha. The rapeseed area number on its own was even more impressive, soaring 30.2pc from 5.96Mha last year to 7.76Mha last week.

As a result, total oilseed production this season could be as high as 10Mt, a national record and up from the 8.6Mt harvested earlier this year. While the potential is certainly there with a good start and a higher area, the extent of the production increase will be determined by rainfall and temperatures over the next four months.

India is the world’s biggest importer of edible oils, with imports of palm oil, predominantly from Indonesia and Malaysia, soybean oil, mainly from Argentina and Brazil and sunflower oil, primarily from Ukraine and Russia, costing the country a record US$15.7 billion over the last 12 months. The significant rise in rapeseed production should decrease India’s import requirement in 2022.

Farmers push back

Meanwhile, on November 29, the Indian parliament passed a bill to repeal three laws aimed at deregulating agricultural markets, bowing to pressure from farmers who have protested for over a year, insisting the laws be revoked. The contentious laws saw thousands of people, including many elderly farmers, brave extreme weather and a severe second wave of coronavirus infections to camp out on the fringes of New Delhi over the past year.

In addition to their repeal mandate, the protesting farmers are also demanding that the Modi administration introduce a law to extend the MSP scheme. The government currently buys grains, predominantly rice and wheat, at the state-set MSP, but the subsidies only benefit about 6pc  of India’s millions of farmers.

Protesters are demanding an MSP mechanism for all crops and one that benefits all Indian grain growers. This move has roused farmers across the country and taken the protests outside the country’s primary grain-growing states of Punjab and Haryana. Indian farmers are excited about the government backflip on the deregulation laws, but they are committed to continuing the protests until the Modi administration also amends the MSP legislation.

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