For the first time in seven years, India's wheat production decreased by 2.5% YoY to 106.84 million mt in the 2021/22 crop year. The heat waves in H1 of 2022 in states like Punjab and Haryana led to crop failure and reduced Indian wheat production.
The Russia - Ukraine conflicts generated concern about the high price of wheat in the global market, attempting buyers to secure wheat from India as an alternative supplier while also struggling with domestic production. India has taken measures to control domestic prices and manage export regulations. Wheat exports were prohibited as of May 13, 2022. However, India permitted wheat shipments that were supported by letters of credit before the restriction and through government-to-government agreements. Since the wheat restriction in May 2022, it has been reported that India has authorized wheat exports of 2.5 million mt.
The Indian government purchases wheat from producers to increase wheat reserves. In order to make it more attractive, India has boosted the base price from INR 2,015/quintal to INR 2,125/quintal. Thus, farmers can increase their wheat production and sell wheat at these prices to fulfill the government's reserve while also gaining more revenue. It is worth noting that the Indian government purchases wheat from farmers at state-set prices (INR 2,125/quintal) to maintain food aid programs for around 800 million people with a total population of 1.4 billion people.
Every three months, India sets the required minimum reserve of wheat based on demand and local production. The minimum amount of wheat required for Q4-22 was set at 20.52 million mt, while India’s wheat reserves on October 1st surpassed 22.75 million mt. Two months later, on December 1st, the Indian wheat reserve fell to 19 million mt, which is 50% less than the same month in the previous year. On December 12th, Indian wheat reserves continued to decline to 18.2 million mt, 11.3% less than the minimal amount of wheat reserves required for Q4 -22. The reduced wheat reserves were due to increased allocation to food aid programs while less wheat was added to the stockpiles.
Despite reserves falling below targets, as of December 23th, wheat had been planted on 31.23 million ha during the current season, an increase of 3.2% YoY. Higher acreage was recorded from Rajasthan, Gujarat, and Uttar Pradesh. If the weather is favorable, Indian wheat production could increase. The new harvest season and early wheat could be used to top up reserves above the 13.8 million mt minimum targets set for Q1-23. . Increased wheat production could aid the government in stockpiling more than the minimum reserves required throughout 2023. It also opens the possibility of India reevaluating the wheat export ban before the next season starts in April 2023.