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Informist, Tuesday, May 6, 2025

 

By Pallavi Singhal

 

NEW DELHI – The government may not remove restriction on exports of wheat this year as stocks with the Food Corp. of India are likely to remain lower than the five-year average even after achieving the procurement target for the year, Crisil Intelligence Director Pushan Sharma told Informist in an email interview. By the end of June, when the procurement ends, the wheat stock is expected to be about 11-13% lower than the five-year average even if the government meets the procurement target for the year. 

 

The government had initially set 2025-26 (Apr-Mar) wheat procurement target at 31.3 million tonne and subsequently raised it twice to 33.3 million tonnes amid strong procurement momentum.

"The opening stock position for April is reported to be 11.8 million tonnes, 57% higher on year, but 32% lower than the average of last 5 years. Furthermore, with lower ending stocks, expected to be down 11-13% than the five-year average, we expect the continuation in export restrictions on wheat," he said. However, Sharma sees the country to be in a position to export wheat on a government-to-government basis and humanitarian grounds in 2025-26 (Apr-Mar).

 

 

Higher opening stock, up from 7.5 million tonnes last year, came on the back of reduced sales in the open market. The year FY24 had opened with 8.3 million tonnes, just a little over the buffer norm.

 

 

After record wheat procurement of 43.3 million tonnes in 2021-22, the government's procurement fell to 18.8 million tonnes in 2022-23, against a target of 44.4 million tonnes, due to lower production. The next two years also saw low procurement, with 26.2 million tonnes being purchased in 2023-24, and 26.6 million tonnes in 2024-25.

 

The estimate of a record wheat production in 2024–25 (Jul–Jun) pushed Food Corp. of India to increase its procurement this year. The agriculture ministry has estimated wheat production to hit 115.4 million tonnes, up from 113.3 million tonnes last year. The rise in production combined with higher procurement led to speculation the government may allow wheat exports which it had been banned in May 2022. 

 

On other hand, Crisil Intelligence does not see the need for imports due to higher domestic production and higher carryover stock. "With sufficient availability to meet the domestic demand, the need for imports is unlikely to arise this year," he said.
 

 

Following are edited excerpts from the interview:

 

Q. After 2-3 years of a fall in production of wheat, numbers are looking up this year. Do you see the government achieving its 31.27-million-tonne procurement aim?

 

During March, the price of wheat plummeted to INR 2,550 per 100 kilogram from a high of INR 2,880 the previous month on account of early arrivals into the mandi. Moreover, the mandi price for April is reported to be INR 2,460 per 100 kg, which is higher by 1-2% compared with the MSP of Rs INR 2,425 per 100 kg. Procurement is likely to overachieve in Madhya Pradesh and Rajasthan on increased MSP. Crisil Intelligence expects the government to end the rabi 2025-26 wheat procurement close the to target of 31.3 million tonnes.

 

A key driver for achieving the procurement targets is the state government's support through increased MSP in Madhya Pradesh by INR 175 per 100 kg and in Rajasthan by INR 150 per 100 kg. Moreover, relaxation in quality norms for procurement for Rajasthan wherein permissible limit for shrunken or broken wheat grains has been increased to 20% from 6%, luster-loss in wheat is now being accepted up to 10% along with proportion of damaged and partially damaged grains made up to 6% combined.

 

 

Q. The India Meteorological Department has predicted rainfall during India's vital southwest monsoon period to be above normal this season. How do you see this translating for agriculture?

 

Monsoon is considered normal when it ranges between 96% and 104% of the long period average. At 105%, IMD's current forecast is indicative of a slightly above normal monsoon. However, if one has a granular look at the forecast, one sees that there is a 33% probability attached to rainfall being between 105% and 110% of the long period average and a meaningful 26% to rainfall being above 110%.

 

In the past, it has been observed that a slightly above normal monsoon went well for agriculture, since they aid not just the Kharif season but also in filling the reservoir levels for the rabi season. But in case monsoon is in excess of 110% of long period average, it could have an adverse impact on yields of crops during the Kharif planting season, while still boding well for the rabi season. We expect to get more clarity during IMD's second forecast during end of May.

 

However, considering monsoon is at 105% of long period average, it is likely to lead to an increase in acreage for key crops such as paddy, maize, cotton, and soybean, driven by higher prices due to factors like eased export restrictions such as for rice, demand from the ethanol industry for maize, and lower acreages as well as crop damage in the previous year as has been observed in case of soyabean and cotton, respectively.

 

Moreover, acreages under crops like black gram and green gram are expected to witness a decline on account of decline in prices by 8% and 10%, respectively, during crop year 2024-25 (Jul-Jun) compared with crop year 2023-24. Varietal shifts and reduced yields in sugarcane are likely to lead to decline in acreages under the crop. Acreage under millets like bajra, however, is expected to increase, driven by improved demand and 10% prices higher.

 

However, the spatial and temporal distribution of rainfall bears watching. Moreover, this rainfall distribution across the country will also be crucial factor for the acreages under Rabi crops.

 

Q. India's retail inflation fell to a 67-month low of 3.34% in March with food inflation, which dropped to a 40-month low of 2.69%, driving down the headline figure. How do you see this moving forward, what is the price trajectory for tomato, onion, potato looking like? 

 

Tomato arrivals have started to decline across key markets in Uttar Pradesh, Maharashtra, Gujarat, Chhattisgarh, Odisha, and West Bengal, leading to a combined month-on-month drop of around 15%. These states contribute approximately 43–45% of the country's total tomato production. Consequently, prices have begun to rise. With the summer crop primarily sourced from southern states, and given the reduced supply alongside stable demand, tomato prices are expected to stay elevated in the coming months.

 

Potato production in calender year 2025 is estimated to be 4-5% higher on year, majorly attributed to an increase in yields in the major growing regions. Despite higher production, strong demand from both domestic consumption and processing segments is expected to keep prices firm in the coming months. However, average potato prices during calender year 2025 are expected to decline by 16% from the high base of last year. 
 

Q. According to the first advance estimates released by the Department of Agriculture and Farmers' Welfare, production of rabi onions for 2024-25 (Jul-Jun) is expected to be up 18% on year. Do you see prices remaining stable even through the lean period on the back of this rise? How would the decision to remove duty on onion exports affect this?

 

Onion prices are currently between INR 900 and INR 1,000 per quintal as of Tuesday. This represents a year-on-year decline of approximately 21%. During the lean supply period from July to October, onion prices are expected to remain firm, primarily supported by increased demand during the festival season. This seasonal demand typically leads to a price surge and traders are building up stocks at current lower prices to sell during the lean months. 

 

In 2024, government procured 470,000 tonnes of onions and released them into the market during August to October. For this year, the government has set a buffer stock procurement target of 300,000 to 400,000 tonnes, to maintain the buffer stocks during the lean months.

 

With relaxation of export restrictions, onion exports in FY26 are projected to recover to levels seen in FY23, reaching an estimated 2.3 million tonnes to 2.5 million tonnes. Historically, export demand contributes around 8–10% of the total onion production. This resurgence in export activity is expected to lend strong support to domestic prices over the coming months, helping to stabilise market sentiment and provide relief to farmers through improved price realisation. Prices are likely to trade 35-40% higher from the current levels during Sept-Nov with increased export demand.

 

Q. What is your view on commodity prices globally?

 

For rice, the global production in 2025 is forecast at a record 536 million tonnes, up 2.6%, due to expanded planting in countries like India, Cambodia, and Myanmar. On the demand side, rice consumption is expected to reach new highs, particularly due to increased use in food and ethanol production, especially in India. Global rice exports and imports are also projected to grow by 6-7% on year. However, rice prices are trending downward amid ample exportable supplies and subdued import demand, with the Food and Agriculture Organisation's All Rice Price Index falling 6-7% in February and 1-2% in March.

 

Wheat production is expected to grow modestly by nearly 1% in crop year 2024-25 (Jul-Jun) to reach 796.8 million tonnes, supported by better output in the European Union and the US, although some regions face weather-related yield risks. Demand remains stable, with increased industrial use balancing out flat food consumption. However, international trade is forecast to decline by 7-10% due to lower Chinese imports and reduced exports from Russia and Kazakhstan. Wheat prices are generally softening, with a 2-3% drop in March and a projected annual decline of around 4%.

 

Global maize production is set to decline marginally by 1-2% in crop year 2024-25. Demand remains robust across food, feed, and ethanol segments, with global utilisation expected to rise by 1-2% and US exports also increasing. Despite temporary price increases from supply tightening in Brazil, maize prices are expected to remain under pressure, with US Department of Agriculture projecting lower averages.

 

Soybean supply is expanding globally, particularly in Brazil, where production is expected to hit a record 169 million tonnes during its marketing year 2024-25 (Oct-Sept), positioning it to meet strong Chinese demand. In contrast, US soybean acreage is expected to decline in the upcoming year due to price competition with corn and cotton; however, ending stocks are rising. Demand for soybean crushing and exports is strengthening, notably for biofuels and China-bound shipments. While soybean prices spiked temporarily due to Brazilian weather disruptions, they are trending lower overall.

 

Sunflower seed production globally is declining by 7% in its marketing year 2024-25 (Sept-Aug), majorly due to a decline in Ukraine and Russia. Export availability from key suppliers like Ukraine and Russia is tightening, adding pressure to supply chains. Demand for sunflower oil remains firm across food and industrial sectors. Prices are likely to remain elevated in the ongoing year due to constrained supply and sustained global demand.

 

Global sugar output in sugar marketing year 2024-25 (Oct-Sept) is forecast to increase marginally by 1-2%, especially with favorable weather in Brazil and marginal production gains in India. Demand remains steady across food and biofuel uses. However, despite the improved supply outlook, global sugar prices have experienced high volatility. FAO expects sugar prices to decline by around 3-4% for the year due to better than expected harvests.

 

Global cotton production is set to increase by 6-7% in its marketing year 2024-25 (Aug-Jul) but certain regions face uncertainty due to weather-related challenges. In the US, cotton acreage is likely to expand in the coming year as dry weather encourages farmers. Demand for cotton is improving globally, contributing to moderate price swings. However, prices have dropped 18-19% over the past year. Prices will remain under pressure from anticipated production increases.

 

Q. There is a concern that sowing of maize is replacing crucial food crops such as soybeans and pulses in the country. What is your view?

 

Maize is gaining acreage in key soybean-producing states like Madhya Pradesh and Rajasthan as soybean prices have declined by 9%, in crop year 2024-25 (Jul-Jun) till April, compared with the previous crop year. This decline is attributed to a decrease in demand for soymeal for animal feed production due to substitution with maize Distiller's Dried Grains with Soluble, which is available at lower prices. The acreages under key kharif pulse crop tur are expected to shift towards maize in Karnataka from a high base of last year, on account of steep on-year decline in prices of the commodity.

 

Q. How do you see US President Donald Trump's tariffs impacting India's agricultural sector?

 

The impact of Trump's tariffs on India's agricultural sector is expected to be marginally favorable, with minimal long-term impact as the US accounts for only 10% of India's agricultural exports. However, India is likely to benefit from increased tariffs on regional competitors like China, Thailand, Vietnam, and Indonesia, particularly in categories like frozen shrimp and rice.

 

In case of frozen shrimp, India may face short-term challenges due to the new tariff regime but could regain market share from Association of Southeast Asian Nations competitors like Indonesia and Vietnam. While, in the case of rice, India is expected to benefit from higher tariffs on Thailand and China, enhancing its competitiveness in the US rice market. With a stable rice import demand in the US, the tariff change will favor India's rice exports, and the country's unit price realisation in the US is significantly higher compared with other major export destinations.   End

 

Edited by Akul Nishant Akhoury

 

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