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Informist, Wednesday, May 14, 2025

 

--NCML MD, CEO Gupta: Govt may decide on wheat exports only by January

--CONTEXT: National Commodities Mgmt Services MD Sanjay Gupta in interview

--NCML Gupta: Lack of hedging tools stops stockists from buying more wheat

--NCML Gupta: Stock limits unlikely to return as wheat production high

--NCML Gupta: Unlikely to see wheat shortage in domestic market this year

--NCML Gupta: Do not see rice prices bouncing back in near term

--NCML Gupta: See cereal prices suppressed for next 2-3 years

 

By Pallavi Singhal

 

NEW DELHI – The prospects of resumption of Indian wheat exports in the near term appear to be bleak despite the anticipated rise in domestic production in the crop year 2024-25 (Jul-Jun), Sanjay Gupta, managing director and chief executive officer of National Commodities Management Services Ltd., said in an interview.

 

National Commodities Management Services is one of the country's largest integrated post-harvest solutions provider. It offers services in procurement, storage, transportation, inspection, testing, electronic trading, and weather indications for various agricultural commodities.

 

The country's supply chains have been severely depleted by the decline in wheat output over the past two crop years, making it challenging for the government to permit resumption of exports in the immediate future, he said. Wheat exports have been barred since May 2022. "At the earliest, a decision on allowing wheat exports might be considered by January," Gupta told Informist. However, government-to-government wheat export deals could be explored on a case-by-case basis on account of robust government procurement, he added.

 

Higher arrivals of the grain in the market this year, along with increased procurement, have been giving the government and the market the confidence that production has seen a robust rise in the current crop year. The agriculture ministry's second advance estimate for 2024-25 projects wheat output to reach a record 115.4 million tonnes, up from 113.3 million tonnes last year. The government believes wheat production may even exceed this projection, as Informist reported exclusively Thursday.

 

The optimism is backed by the Food Corp. of India's record purchases in the rabi marketing season 2025-26 (Apr-Mar) at a minimum support price of INR 2,425 per 100 kg. As of Wednesday, the procurement of wheat had reached 29.1 million tonnes, over 9% higher than last year's total procurement of 26.6 million tonnes. The procurement is nearing the revised target of 33.3 million tonnes, which is boosting market expectations of the government allowing the resumption of wheat exports. 

 

Following are edited excerpts from the interview:

 

Q. With Indian rice prices down in both the global and domestic markets, when do you see them rebounding?

A. I don't have the exact data, but I think we are left with a huge carryover of rice/paddy stock from the previous season and if the monsoon this year is good, which is the expectation, we may see an increase in the acreage and yield in the coming season. So unless there is a big event or natural calamity that disrupts production/export from countries such as Thailand, Vietnam, etc., I do not see rice prices bouncing back and I see this low price regime continuing.

 

Q. What is your estimate of wheat production?

A. We estimate wheat production to be at least above 110 million tonnes this year. It can even breach the 115 million tonnes number given by the government. There are multiple indicators to show that wheat production this year is higher than in previous years:

1. The government procurement so far has been higher and there is confidence that the procurement target will be met.

2. Private players have been able to procure in sufficient quantities. This is visible in the stock levels in NCML warehouses and silos.

3. Lower wheat prices are indicative that there is sufficient production to meet demand.

 

Q. There is concern in the government that private trade is not buying enough. What could be the reasons?

A. Private trade has been worried about stocking policies/guidelines owing to experience. Sudden changes in policy or mid-course corrections come with significant costs and headaches for the private sector. The absence of a hedging mechanism due to the ban on futures and options in wheat and commodity trading is also a contributing factor to low stocking of wheat by private players. As of now there is no clarity on the government's stand on resumption of export of wheat and wheat products, which is also making exporters procure wheat with caution. Another reason could be lower prices of rice, which is a substitute for wheat, albeit in a limited sense. Last year's open market sales experience has given rise to a plausible situation where private players may be hoping to bag wheat when the government releases it to save stocking and transportation costs, thereby preventing them from being very aggressive in procurement.

 

Q. On the lines of what you said, trade has been worried about stock limits which have been reimposed and made stricter for the past two years. With the record wheat production outlook we currently have, do you think the government will impose wheat stock limits this year?

A. Wheat stocking limits ended on Mar. 31. It has been two months since the limits were removed and I think it is going to stay that way. I don't think anything like this is going to happen this year unless there is a significant spike in prices. Moreover, government procurement has been very high, it has already crossed 29 million tonnes of its 33.3-million-tonne target. Government can easily intervene in the market via open market sales if prices rise.

 

Q. Government's foodgrain production targets are lower than last year. The targets for pulses have shrunk drastically at a time the government has launched its pulses mission. What's your view?

A. While the targets for wheat and rice have seen a rise, those for oilseeds and pulses have shrunk. I see this on the back of extremely high pulses prices in the past two years coupled with low broiler (chicken) prices. There is a high chance that consumption of pulses has gone down with people sticking to non-vegetarian options for protein. This may be the reason the government has lowered its pulses output targets. There are multiple other reasons which are leading farmers to avoid cultivation of these crops. Poor productivity due to lack of hybrid seeds and ban on genetically modified crops is another reason farmers may be avoiding planting them. The lack of a stable procurement regime at MSP, even though we have seen a significant improvement in the same in the recent past, adds to this.

 

The threat of imports which can have a significant impact on prices in a very short time is a major reason for sowing to go down. There are many countries in the world where pulses are produced keeping the Indian market in sight, and as they have no alternative markets, any excess production there has a price-lowering effect on Indian markets.

 

For oilseeds, soybean seems to be the reason for the government's downside revision of output targets. Soybean has been suffering from twin effects of poor yield and very low demand due to low prices for the de-oiled soymeal, which have fallen as a result of competition from rice byproduct or distiller's dried grains with solubles.

 

Q. The government has raised the wheat procurement target twice this year--first from 31.3 million tonnes to 32.3 million tonnes, and then by a further 1 million tonnes. Do you think it will be able to meet its target?  

A. I think the government of India should not face any difficulty this year in meeting its wheat procurement target as the production is sufficient. They may even procure higher than the target, if the private sector does not step up its procurement and prices drift below the MSP.

 

Q. With robust government buying, do you see any shortage of wheat in the domestic market?

A. Shortage of wheat in the domestic market looks unlikely as of now. In general, I see cereal prices drifting down because of good production of both rice and wheat. The situation is likely to continue for some more time and we will see an upward price movement only if exports are permitted or wheat replaces rice in the food security programme.

 

In fact, with the robust production and a similar outlook for the coming crop year (2025-26), I see prices of cereals suppressed. We are going to enter a phase of low inflation for the next 2-3 years at least. Prices will also hold steady on account of the good rainfall outlook which will help with maize production. So I think from the soft commodity point of view, it will be a very, very benign year.

 

Q. With the government's efforts to boost diversion of rice towards ethanol, do you think maize acreage is likely to fall next year?

A. Maize in India is grown almost round the year with spring and rabi maize acreages staying stable on account of high yields, which are often comparable to the global best. The only threat to rabi maize acreage comes from oversowing of wheat. However, the current price gap is not sufficient to bridge the yield gap which exists between the two.

 

Kharif acreages, meanwhile, are dependent on multiple factors like rainfall (quantum and timing) and sowing of alternative crops such as rice, cotton, and soybean. Therefore, it is very complicated to predict the kharif acreages; however, the biggest factor responsible for the shift in acreages is the delay in or absence of rainfall. As long as the monsoon is normal, the impact of lower prices should be minimal. Maize also does well as it does not need any post-harvest processing at the farm. In fact, if the poor rice prices continue, I see acreages moving away from paddy/rice towards maize.

 

Q. India imports maize but sources it only from countries growing non-genetically-modified varieties. Industry has been asking that modified maize be allowed, at least for ethanol production. What is your view?  

A. To be honest, I am an advocate of free trade. The only problem the government may have is ingress of genetically modified maize into the country. I see a bright future for maize production in India as the E20 goal (20% ethanol-blended petrol) would mean a quantum jump in the production of maize. In the coming days, as wheat and rice prices cool, we will see higher acreages under maize.

 

Q. But do you see the government allowing genetically modified crops after what has been going on with Bt cotton, which is seeing increased pink bollworm attacks, diminishing any gains in yield due to the modified gene?

A. In our country, no genetically modified technology has been permitted after the commercialisation of Bollgard-II cotton in 2006. The battle between the emerging pest threats and technology is a continuous one and newer technologies are required to overcome new challenges like pink bollworm. The launch of new insecticide molecules to tackle emerging threats also suffers from myriad roadblocks. In such a scenario it becomes very difficult for farmers to maintain their productivity levels, let alone improve it.

 

There is also a misconception that modified cotton has caused all this. In fact, we became a significant producer and exporter of cotton only after the introduction of GM (genetically modified) or Bt cotton technology in the market. Currently, the technology occupies 90%-plus market share. Therefore this is an earnest request to the government on behalf of all stakeholders, including cotton farmers, ginners, spinners, weavers, and the cotton textiles industry, to allow the development and introduction of newer technologies so that our pre-eminent position in the world is preserved.

 

Q. So you are of the view that all modified crops should be eventually allowed?

A. All agriculturally developed economies have allowed modified crops. India has been the only exception because of the bountiful production we are enjoying thanks to our farmers, seed producers, and agri input producers, who have raised yields even in the absence of genetically modified technology.

 

However, the productivity gains in the absence of such technologies will be limited and, eventually, we may have a situation of shortages and consequent price rise. The world has been growing and consuming modified crops for almost 30 years now and this experience and, hopefully, the data generated on the likely ill effects of this technology will provide necessary confidence to the government to allow the ingress of this technology gradually. This is my hope.  End

Edited by Rajeev Pai

 

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