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Pakistan has been moving to fill part of the gap left by India in export markets due to the latters ban on exports of wheat and rice.
India may be at loggerheads with Pakistan over a wide range of issues but one of its policies is unwittingly working in favor of its regional rival: New Delhis export ban on wheat and ordinary rice.
Indias government-held stocks of food grains hit an all time high of over 65 million metric tons this month, more than double its strategic reserve requirements. Nevertheless, the export ban, first introduced a few years ago to tame inflation, is still in place.
Pakistan, in contrast, permitted exports of surplus wheat this year. Despite having witnessed its worst-ever floods in 2010, instead of pressing the panic button, rice shipments have also continued unhindered.
Pakistan has already exported a record 2 million tons of wheat this year and several hundred thousand tons more are in the pipeline, Muhammed Najib Balagamwalla, chairman of the Seatrade Group, a Karachi-based commodities trading company told India Real Time on Thursday. He said exports may reach nearly 3 million tons by early August. After that, he said its likely to taper off, since by then excess stocks would have been mostly shipped out.
Indias wheat and rice if permitted to be exported, is more competitive than that of Pakistans in the global market, a Mumbai-based executive with a global commodities trading company told India Real Time.
Most traders estimate that based on current domestic market prices, India can export milling wheat around $280 per ton, making its grain the cheapest in the world. Pakistan has exported its old crop of wheat at $330-$335 per ton and the latest harvest is now trading at $305-$309 per ton. The latest bumper harvest helped keep the prices of the new crop lower.
Pakistan has been moving to fill part of the gap left by India in export markets. A large part of its surplus has been sold to Bangladesh, which traditionally consumed Indian grain.
Until three years ago, India used to have a large rice export market in Africa. But the subsequent ban on exports of non-basmati grades of rice resulted in Pakistan and Thailand stepping in instead. Pakistan has also shipped out wheat to southeast Asian countries and the Middle East, filling a crucial gap for milling wheat in global trade, due to a drought in Russia last year. However, traders point out that many of these buyers would have snapped up Indias cheaper grain, had it been available.
P. Chengal Reddy, the head of an Indian farming lobby, the Consortium of Indian Farmers Associations, told India Real Time that, at a time when many farmers have to sell their grain below the government-set intervention price, loosening up exports would be welcome. He said allowing exports of at least 10 million tons of wheat and rice would be prudent.
For instance. Mr. Reddy mentioned farmers in Andhra Pradesh, who are holding 3 million-4 million tons of unmilled rice they are unable to sell it because of abysmally low market prices. Exports could have given a boost to their earnings, said Mr. Reddy.
A decade ago, India exported millions of tons of food grains to get rid of the surplus stock. One of the reasons why the government may be wary of letting go of its stocks this time around, is because it is drafting new legislation on food security that is likely to significantly extend food subsidies to a large share of the countrys population.
On paper, the Indian government had agreed to make an exception: last year, it agreed to allow exports of 500,000 tons of grains to Bangladesh following a diplomatic request. But 13 months after the permission to export the first batch of rice was granted, none has yet been shipped.
India Exports Ban Helps Pakistan Trade - India Real Time - WSJ
India may be at loggerheads with Pakistan over a wide range of issues but one of its policies is unwittingly working in favor of its regional rival: New Delhis export ban on wheat and ordinary rice.
Indias government-held stocks of food grains hit an all time high of over 65 million metric tons this month, more than double its strategic reserve requirements. Nevertheless, the export ban, first introduced a few years ago to tame inflation, is still in place.
Pakistan, in contrast, permitted exports of surplus wheat this year. Despite having witnessed its worst-ever floods in 2010, instead of pressing the panic button, rice shipments have also continued unhindered.
Pakistan has already exported a record 2 million tons of wheat this year and several hundred thousand tons more are in the pipeline, Muhammed Najib Balagamwalla, chairman of the Seatrade Group, a Karachi-based commodities trading company told India Real Time on Thursday. He said exports may reach nearly 3 million tons by early August. After that, he said its likely to taper off, since by then excess stocks would have been mostly shipped out.
Indias wheat and rice if permitted to be exported, is more competitive than that of Pakistans in the global market, a Mumbai-based executive with a global commodities trading company told India Real Time.
Most traders estimate that based on current domestic market prices, India can export milling wheat around $280 per ton, making its grain the cheapest in the world. Pakistan has exported its old crop of wheat at $330-$335 per ton and the latest harvest is now trading at $305-$309 per ton. The latest bumper harvest helped keep the prices of the new crop lower.
Pakistan has been moving to fill part of the gap left by India in export markets. A large part of its surplus has been sold to Bangladesh, which traditionally consumed Indian grain.
Until three years ago, India used to have a large rice export market in Africa. But the subsequent ban on exports of non-basmati grades of rice resulted in Pakistan and Thailand stepping in instead. Pakistan has also shipped out wheat to southeast Asian countries and the Middle East, filling a crucial gap for milling wheat in global trade, due to a drought in Russia last year. However, traders point out that many of these buyers would have snapped up Indias cheaper grain, had it been available.
P. Chengal Reddy, the head of an Indian farming lobby, the Consortium of Indian Farmers Associations, told India Real Time that, at a time when many farmers have to sell their grain below the government-set intervention price, loosening up exports would be welcome. He said allowing exports of at least 10 million tons of wheat and rice would be prudent.
For instance. Mr. Reddy mentioned farmers in Andhra Pradesh, who are holding 3 million-4 million tons of unmilled rice they are unable to sell it because of abysmally low market prices. Exports could have given a boost to their earnings, said Mr. Reddy.
A decade ago, India exported millions of tons of food grains to get rid of the surplus stock. One of the reasons why the government may be wary of letting go of its stocks this time around, is because it is drafting new legislation on food security that is likely to significantly extend food subsidies to a large share of the countrys population.
On paper, the Indian government had agreed to make an exception: last year, it agreed to allow exports of 500,000 tons of grains to Bangladesh following a diplomatic request. But 13 months after the permission to export the first batch of rice was granted, none has yet been shipped.
India Exports Ban Helps Pakistan Trade - India Real Time - WSJ
