India looks likely to harvest bumper wheat crop in 2013

Mon Nov 5, 2012 5:28am EST

* Good soil moisture, improved seeds to boost output

* Farm minister favours higher prices to farmers

* Bumper crop to help exports continue in 2013

By Mayank Bhardwaj and Deepak Sharma

NEW DELHI/MUMBAI, Nov 5 (Reuters) - India looks likely to harvest a bumper crop of wheat in 2013, its sixth in a row to exceed demand, after late monsoon rains replenished soil moisture, strengthening prospects for exports from the world's second-biggest producer for a second year.

Annual monsoon rains picked up near the end of the four-month after a slow start in June, prompting Farm Minister Sharad Pawar to exhort farmers to plant winter-sown crops, such as wheat, early to cash in on good soil texture.

Farmers took Pawar's advice and have planted wheat on 3 percent to 5 percent of the normal acreage, which should rise to 40 percent to 60 percent by Nov. 20, slightly ahead of the usual pace, Indu Sharma, chief of the state-run Directorate of Wheat Research, told Reuters.

"If temperatures do not rise abruptly in end-February and early-March, we are heading for a harvest almost as big as last year," she said.

India, also the world's biggest consumer of the grain after China, produced a record 93.90 million tonnes in 2012 for an annual increase of 8 percent. Demand amounts to about 76 million tonnes a year.

Inventories have swelled after repeated bumper harvests, largely because of higher prices the government assures to farmers, driving the state-run Food Corp of India to store grain in the open.

Stung by criticism over its inability to protect wheat stockpiles from rot and decay, the government lifted a four-year old ban on exports in September 2011 before allowing exports from state-run warehouses as well.

If farmers produce yet another bumper crop, the government will continue unrestricted wheat exports, said P K Joshi, a director at the International Food Policy Research Institute.

Exports from India next year could make up for a global shortfall after drought parched other key producing areas.

This year drought hit the Black Sea countries of Russia, Ukraine and Kazakhstan, which normally produce about 10 percent of the world's wheat, forcing them to slash their harvest by a third. Russia's 2012 wheat crop will lag officials' estimates by 6 percent.

In the United States, the world's biggest wheat exporter, a severe drought is shrinking but not fast enough. In Australia, the biggest wheat exporter behind the United States, the early harvest is showing poor yields.

At 0854 GMT, benchmark Chicago wheat was trading at 8.67-1/2 a bushel, up 0.35 percent.

Wheat has risen for three out of four sessions as dryness in the U.S. plains and forecasts of rain at harvest time in Australia threatened to tighten global supplies.

FLAT PRICE BUT BUMPER OUTPUT

Saddled with unmanageable stocks and a large food subsidy bill, India's government last week agreed not to raise the price it will pay to buy wheat in 2013 from local farmers for the first time in decades.

The flat wheat price is unlikely to restrain output, trade, industry and government officials believe.

Ample soil moisture, use of improved, high-yield seeds, and early sowing are factors that boost productivity, Sharma said.

"The early onset of winter, a comfortable water level in dams and high prices of wheat in the local market will lure farmers to plant wheat," said a senior government official from the biggest wheat producing state of Uttar Pradesh.

Pawar advocated higher wheat prices at last week's cabinet meeting, government officials say. But Finance Minister P. Chidambaram and Food Minister K. V. Thomas, concerned over a mounting food subsidy and bulging stocks, did not want this.

Higher subsidies of fuel, food and fertilizer have prompted many economists to forecast a fiscal deficit of 6 percent of gross domestic product (GDP) this year, but Chidambaram forecasts 5.3 percent, up from a target of 5.1 percent.

Farm ministry sources say the government could revise the purchase price for wheat if producer states, such as northwestern Punjab and Haryana and northern Uttar Pradesh, press for an increase around March, just ahead of the harvest. (Editing by Jo Winterbottom and Clarence Fernandez)