CANBERRA: The Australian wheat industry has received its most positive market signal for months with the news that India has removed a 10 per cent import duty on wheat. There has been trade speculation that India would need to augment its drought-impacted wheat harvest with a substantial import program, with many putting the figure at around five million tonnes. This move to remove import duty from the Indian government paves the way for more wheat imports. Within India, the price of wheat has soared to near record levels in spite of the low international value.
Australia is well positioned to target the Indian market, with competitive basis levels. Along with that, it is also freight-advantaged compared to competitors out of North America. Indian imports of 5mt of wheat would be the highest figure for a decade. India is historically a swinging importer/exporter of wheat, so such a big import requirement will have a big impact on the wheat stocks’ dynamic in its vicinity.
CBH general manager of marketing and trading Jason Craig said the news would be positive for Australian wheat growers. “Indian demand should see grower values remain positive for APW1 at about A$240 per tonne free in store (FIS) as the market sees this demand predominantly coming from Australia, putting a theoretical floor in pricing,” Mr Craig said. Market Check director Brett Stevenson said the Indian announcement had reverberated around the Australian industry. “We noticed it straight away once the import duty was removed, there was a very positive response,” he said.
“The Australian industry was monitoring demand from India closely. “The market is just wondering whether there is further scope for exports beyond that 5mt mark.” Mr Stevenson said he imagined the bulk of demand from India for Australian wheat would be for APW quality grain. Other factors that may be potentially supportive of a price rise include a lack of winter snow cover for the US winter crop and dryness concerns in South America.
A recent US Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report did not have any major bearing on wheat prices, with all figures within the general range of industry estimates. However, a United Nations Food and Agricultural Organisation (FAO) report has flagged another year in the doldrums for wheat prices due to strong production and ample stocks.
The depressed prices are cutting plantings in developed nations such as the US, but the FAO said other countries such as Russia and Ukraine are expected to see more plantings in 2017.The Indian situation is expected to change, with markedly better water availability for the 2017 crop. Total global wheat production for 2016-17 is estimated by the FAO at 749.3mt, up 2.6mt year on year.
