Rumours have intensified that India is preparing to import wheat in 2024-25. Of course, rumours are not facts. However, the facts support that India should consider importing wheat in the coming marketing year.
India is a vast country with a population exceeding 1.4 billion. The government must manage the dual policy goals of ensuring food and income security. These goals are not always congruent. Many of the people who require a boost to food security are in this situation because prices for their farm production are not high enough to ensure income sufficient to meet basic needs. The Indian government walks a tightrope managing this dilemma.
Politics, both domestic and international concerns, further shroud the policy decision-making. India’s official statistics cannot be trusted. Prices remain elevated indicating that production did not reach the official Indian government estimate of 112 million tonnes. A leading industry group suggests that production was closer to 105 million tonnes. Some estimates are below even that. Moreover, many market watchers believe that India has overestimated production by multiple millions of tonnes over the last three production cycles.
Given that Indian wheat prices have remained stubbornly firm, logic would dictate that India should allow some imports. The mechanism to provide incentives for imports is to suspend the existing 40% tariff. Afterwards, the highly competent Indian arbitrage sector will import wheat until the shortages ease and Indian prices fall in line with world prices, suggested an analyst with GrainFox this week.
How much will India import and what impact would it have on the market? GrainFox sees anything short of 2 million tonnes as interesting but not something that would sustain upward price momentum. An amount between 2 and 5 million tonnes would be supportive and viewed as a strong bullish indicator. Any imports above 5 million tonnes would be potentially “game-changing” and would have an influence on wheat and even broader grain markets.
A final qualification on this news: Rumours move markets. However, there is nothing like actual incremental demand. If India imports tangible tonnage the market will be bolstered. If it remains in the realm of chatter and innuendo, the market will eventually discount the notion of India importing.
