India boosts local wheat purchases, gives buffer against El Nino

Mayank Bhardwaj PlanetArk 5 Jun 14;

Indian purchases of wheat from local farmers are set to climb at least 8 percent this year, bolstering government stocks against forecasts of below-average monsoon rains and the specter of a possible El Nino weather pattern.

Poor rains in India, where farmers depend on the annual June-September monsoon to irrigate nearly half their land, typically stoke inflation - a key worry for Prime Minister Narendra Modi's newly formed government.

"Higher procurement this year will add substantially to higher stocks and that gives us a considerable cushion to deal with any price rise if lower monsoon rains affect sentiment, pushing up prices," said a government official who did not wish to be named as he is not authorized to speak with media.

Larger state purchases in the world's second-biggest grain producer could also enable the government to allow more exports if it turns out the wheat is not needed domestically.

India has sold a total of about 11.5-12 million tonnes of wheat overseas in the past two years, dragging on global prices Wc1.

India's weather office has already forecast a high chance of El Nino, a weather warming event associated with droughts in some regions.

The monsoon typically arrives on June 1, but rains are late this year with the weather office expecting them to hit the southern Kerala coast over the next day.

Poor rains could thwart government efforts to boost growth which has nearly halved to 5 percent in the past few years and curb inflation that has been running close to double digits.

State procurement agency Food Corp of India has bought 27.6 million tonnes of new-season wheat from local farmers so far this year and will likely purchase a total of 28 million tonnes in the whole of 2014, said a government source, declining to be identified.

The government-backed corporation bought 25.9 million tonnes of wheat from local farmers in 2013.

Unlike rice, Indian farmers grow only one wheat crop a year, with planting from October and harvests in March.

The government buys rice and wheat from local farmers at a fixed price to help boost output, build stocks for its mammoth food welfare programs and to meet any emergency.

India eased a four year-old ban on wheat exports in 2011 by allowing private traders to sell wheat overseas. It later permitted some sales from state-run trading firms.

Shipments totaled 11.5-12 million tonnes in the 2012/13 and 2013/14 fiscal years that end on March 31, with about 6 million tonnes of exports from the Food Corp's warehouses.

The government has forecast a record 95.85 million tonnes of wheat output this year against 93.61 million tonnes in 2013.

(Editing by Joseph Radford)