10-11-2017

India doubles import duty on wheat to 20% on November 8

On November 8, India increased its import duty on wheat to 20% from 10%, according to a customs notice posted on the website of the Central Board of Excise and Customs.

Sources said that some of the reasons for the hike could be higher expected local production for the upcoming marketing year and worries over cheaper imported wheat from the Black Sea.

In March, the world’s second-largest wheat producer had raised the import duty to 10% from 0% in an effort to curb cheaper imports while supporting the local farmers.

India is estimated to have produced 98.38 million mt of wheat in 2016-2017, up 6.6% from the year-ago period after two consecutive years of faltering production due to abnormal monsoon season.

For 2017-2018, the country is expected to produce 97.5 million mt of wheat, according to the government’s first advance estimate released on September 22.

On October 16, USDA revised India’s 2017-2018 wheat production to 98.4 million mt, up 2.4 million mt from its previous estimate, based on the latest government data on favorable weather and record yield.

In light of improved local production and in a bid to protect the interest of local farmers, the government also raised the minimum support price for 2017-2018 rabi crops, including wheat, on October 24.

The MSP is the floor price at which the government agencies buy what from the farmers. In 2016-2017, the MSP for wheat was Rupees 1,625/quintal, up Rupees 100 from a year earlier. The MSP for wheat in 2017-2018 was hiked by Rupees 110 to Rupees 1,735/quintal or Rupees 17,350 ($266.19)/mt, up 6.8% from a year ago.

Wheat is India’s main rabi crop, and the sowing begins in October-November. The government agencies will begin the procurement of the grain at the new MSP in April, according to local media reports.

Based on the higher estimated supply and possibly lower domestic prices, USDA had revised down India’s wheat import forecast in October to 3 million mt, from 3.5 million mt. However, the revision was based on the earlier import duty of 10%, and the current price parity for local wheat versus imported wheat, without factoring any changes in the MSP.

“Cargoes that are yet to arrive will be incurring an additional 10% duty” a trader said.

However, the traders cautioned that the local wheat prices can go up on the back of higher MSP, and if the imports are still cheaper after paying additional 10% tariff and logistics, the imported wheat will still be viable before harvesting in April 2018.

Sources said that the landed price for imported wheat from the Black Sea to southern India increased by Rupee 1,000/mt to Rupees 18,500/mt, ex-Tuticorin, in the late October as the market was already factoring in a possibility of duty hikes after the increased MSP.

According to market sources, around 1.14 million mt of wheat was contracted from April-November, and more than half of it was from the Black Sea as it was cheaper than Australian wheat.

Traders said that the Black Sea cargoes for October-November were sold at around $215/mt CFR Tuticorin, while the offers for Australian Standard White were at about $240-245/mt CFR Tuticorin for new crop in January.

Source: Platts

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