Indian Granaries Overflow With Wheat on Record Purchases

By Pratik Parija

Feb. 23 (Bloomberg) -- India, the world’s second-biggest wheat producer, must empty its warehouses to make space for the grain that will be bought from farmers starting April 1 after record purchases swelled granaries.

“We have a problem of storage this year,” Agriculture Minister Sharad Pawar said at a conference of growers in New Delhi today.

Mounting stockpiles may prompt the government to lift a three-year ban on exports of wheat, likely weighing on prices that have declined 52 percent in the past year in Chicago. The government will in the next 10 days decide on ending the curbs, Pawar informed the parliament Feb. 20.

Warehouses held 18.2 million tons of wheat on Jan. 1, more than the 8.2 million tons needed to meet shortages, Junior Food Minister Akhilesh Prasad Singh said last week. The country’s so- called central pool held 16.74 million tons of wheat on Feb. 1.

The government, the single biggest buyer of food crops in the country, has purchased 22.68 million tons of the cereal by Feb. 16. It will pay 1,080 rupees ($22) for 100 kilograms (220 pounds) for new arrivals starting April 1, up from 1,000 rupees, to help farmers increase incomes.

India’s wheat output may total 77.8 million tons, compared with 78.5 million ton target set by the government in September, the farm ministry said Feb. 12. Last year’s harvest was a record 78.6 million tons.

Wheat futures for May delivery rose 1 percent to $5.3624 a bushel in after-hours electronic trading on the Chicago Board of Trade. Prices had climbed to a record $13.495 on Feb. 27, 2008.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.