Amid a relative slowdown in demand, the authorisation to export the crop from its godowns via private trade was meant to ease India’s critical pressures on storage. The allocation was be done by bidding with a floor price set at Rs14,700 (US$274) per tonne plus 12.5% state taxes.
However, the USDA has argued that this approach will “increase the implied export subsidy” if the price isn’t reduced.
Imposing conditions
This, the department added, would be compounded by the Food Corporation of India’s demand for a full advance payment before transit, calling it a disincentive for private trade.
Instead, the USDA called on the government to “explore measures for improving the viability of exports of government wheat” in the face of record storage pressure.
The Indian media has since reported insiders suggesting that the government might consider the open auction of FCI wheat at lower prices and without the stricture of conditions to end-users. This in turn could be bought either by local mill producers or by grain exporters.
The USDA highlighted that the current floor price would mean the total cost of government wheat for private trade would run at around Rs16,600 (US$326) per tonne after the cost of transport and freight charges.
"Trade sources report that the government's floor price for old crop wheat is too high to be viable for exports due to weak international prices and expected availability of new crop wheat at lower prices," said the report.
Pressure on storage
Given this harvest’s record crop, new wheat should be ready for shipment in Uttar Pradesh at between Rs14,800 and Rs15,700 (US$274-291) per tonne—fresher but still around the same price as the year-old government-held wheat.
The report also warned that expected foodgrain stocks of 90m tonnes by June would pose an unprecedented storage crisis in the country, with current capacity estimated at around just 71m tonnes. The storage issue is exacerbated by an expected increase on last crop year’s record wheat harvest of almost 94m tonnes.