Financial Services Association, May 30 (Editor Malan) India is in a hot early summer. Not only has the temperature repeatedly broken through historic highs, but the upcoming end of the presidential election has also added a warm political atmosphere to the country.

To some extent, this heat isn't pleasant. Due to high temperatures and droughts, India's wheat crop production this year is expected to be 6.25% lower than the official estimate of 112 million tons. Meanwhile, in 2022 and 2023, the sharp rise in temperature has led to a reduction in crop production in India, which has also led India to introduce several policies banning the export of wheat.

On the other hand, rapidly depleted grain reserves have boosted local food prices, putting pressure on the Indian government's election. Although India's current government and Prime Minister Narendra Modi have a good chance of winning this year's general election, India still needs an additional batch of wheat to calm the market.

According to people familiar with the matter, India is preparing to start importing wheat again after a lapse of six years to replenish the consumed reserves and curb the rising price of wheat in the local market due to poor harvests for three consecutive years.

Allegedly, the Indian government is expected to eliminate up to 40% of wheat import duties this year, which will pave the way for private traders and flour mills to import overseas wheat. The relevant policy is expected to be introduced in June to catch up with the harvest season in Russia, the largest exporter of wheat.

Support global prices

Although India's import demand is expected to be small, about 3 to 5 million tons, this will still help support global wheat prices. Chicago's benchmark wheat price recently jumped to its highest level in 10 months, and the market is watching the Russian wheat harvest.

Previously, as Russian wheat was affected by frost damage, the industry was worried that Russian wheat could not avoid a reduction in production, leading to a decrease in global supply. According to Indian expert analysis, wheat imported from India most likely comes from Russia.

Also, according to an analysis by an Indian source, the current view is that the government will abolish wheat import duties after June and then resume levying import taxes before India starts sowing wheat in October to protect the interests of Indian farmers. This is likely to be the next administration's course of action.

In April, in order to ensure a smooth general election and win public opinion, the Indian government sold a record 10 million tons of wheat to the private sector to calm prices, causing official reserves to drop to 7.5 million tons, the lowest level in 16 years.

However, since harvesting in April, India has purchased only 26.2 million tons of wheat, which is a bit short of the target of 30-32 million tons. A global trading company predicts that India's official procurement volume is unlikely to exceed 27 million tons.

As a result, re-purchasing wheat from overseas became a matter of course. Pramod Kumar, president of the Indian Federation of Flour Processors, said that there are plenty of reasons to abolish import duties on wheat; this is the best way to ensure sufficient supply in the Indian market.