By MATTHEW WEAVER
The U.S. wheat industry is monitoring India's government to make sure the Asian nation sticks to trade agreements as it deals with excess supplies.
India is producing so much wheat that it's turning to exports to get rid of the excess, said Shawn Campbell, assistant director for the U.S Wheat Associates office in Portland.
India's wheat is lower quality than the wheat produced in the Black Sea region, which in turn is considered lower quality than the U.S., Europe, Australia or Canada, Campbell said.
Storage in India is inadequate, so less than half of India's wheat crop will be stored in the open, under tarps. That raises issues of pests and weather impacts.
"It's just wheat sitting there, rotting away," Campbell said.
The Indian government recently announced plans to offer 5 million metric tons of wheat at a price traders say equates to $314 per metric ton, according to U.S. Wheat. If the Indian government sells wheat for export below its minimum support price, it is seen as an export subsidy. India committed to establishing no export subsidies under its World Trade Organization agreement, according to U.S. Wheat.
U.S. Wheat is concerned that the Indian government's policies could "significantly distort" the world wheat market, and send an artificial signal to farmers to keep growing wheat. Other crops may be more profitable and sustainable and have more demand, according to the organization.
According to U.S. Wheat, USDA estimates predict India will export 6.5 million metric tons in the 2012-2013 marketing year and even more in 2013-2014. But the country's infrastructure will limit wheat exports to a maximum 8 million metric tons, too little to stop continued growth in stocks. India is poised to have a near-record wheat crop of 93 million metric tons, Campbell said.
India will likely be a major player in the future for low-quality and feed wheat markets, he said. India usually has to sell wheat at a discount to most other sellers.
There won't be much effect on the U.S. wheat market, Campbell said, since it sells high-quality wheat.
"It mostly affects us if, for instance, a buyer is looking for cheap wheat and other competitors like the Black Sea are out," Campbell said. "They can go to India instead of us."
India is behind the U.S. on quality to an "immense" degree, Campbell said, having focused on increasing quantity to feed its population.
According to U.S. Wheat, for a decade, India's wheat yields were stagnant and planted wheat acres declined steadily. Domestic wheat prices in India spiked to record highs and there were widespread reports of hoarding by grain dealers and market speculators.
In reply, India's government banned wheat exports from 2007 to 2011. The government also abolished the country's wheat import tariff of 60 percent, which allowed wheat imports into the country for the first time in five years.