Voluntary Report - public distribution

**Date:** 7/30/2004

**GAIN Report Number:** IN4080

IN4080

**India**

**Grain and Feed**

**August Update**

**2004**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, New Delhi

**Prepared by:**

A. Govindan

**Report Highlights:**

MY 2004/05 rice production is revised down to 80 million tons due to
drought or floods in several major rice growing areas. Coarse grain
production, particularly millet, is also likely to decline sharply.
Lower grain stocks and drought concerns will likely discourage the
government from providing grain export subsidies.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

New Delhi \[IN1\]

\[IN\]

**Table of Contents**

[**SECTION I -- SITUATION AND OUTLOOK
3**](#section-i-situation-and-outlook)

[RICE 3](#rice)

[Poor Monsoon Likely to Impact Rice Production
3](#poor-monsoon-likely-to-impact-rice-production)

[Stocks Down Despite Record Government Procurement
3](#stocks-down-despite-record-government-procurement)

[Exports Down but Not Out 3](#exports-down-but-not-out)

[WHEAT 4](#wheat)

[Procurement Down 4](#procurement-down)

[Drought Impact on Wheat Production
4](#drought-impact-on-wheat-production)

[Exports Continue 4](#exports-continue)

[COARSE GRAINS & PULSES 4](#coarse-grains-pulses)

[SECTION II - STATISTICAL TABLES 5](#section-ii---statistical-tables)

[Table 1: Commodity, Rice, PSD 5](#table-1-commodity-rice-psd)

[Table 2: Commodity, Wheat, PSD 6](#table-2-commodity-wheat-psd)

[Table 3. Government Procurement, Stocks, and Offtake of Rice (a year
ago)
7](#table-3.-government-procurement-stocks-and-offtake-of-rice-a-year-ago)

[Table 4: Government Procurement, Stocks, and Offtake of Wheat (a year
ago)
7](#table-4-government-procurement-stocks-and-offtake-of-wheat-a-year-ago)

#   {#section .unnumbered}

# SECTION I -- SITUATION AND OUTLOOK

## RICE

# 

### Poor Monsoon Likely to Impact Rice Production

MY 2004/05 (Oct-Sep) rice production is revised down to 80 million tons
from Post's earlier forecast of 90 million tons in light of the poor
monsoon performance in the major growing areas of north and central
India and the floods in east and northeast India (see GAIN report
IN4075). If rains continue to evade the drought-affected regions in
coming weeks, production could decline even more, as was the case in
2002, when production plummeted to 72.7 million tons. The government
recently revised the 2003/04 rice production downward to 86.4 million
tons from its previous estimate of 88 million tons, which is reflected
in the PS&D table.

Although the monsoon arrived two weeks ahead of its normal schedule, its
progress was slow and its coverage patchy. Rains since June 23 have been
significantly below normal in the major rice growing regions of West
Uttar Pradesh, Punjab, Haryana, East Madhya Pradesh, Konkan and Goa,
Madhya Maharashtra, Coastal Karnataka, and Kerala. Rainfall distribution
has also been erratic in the major rice growing states of Chattisgarh
and Andhra Pradesh, although there was an improvement in recent weeks.

Heavy July rains caused severe floods in Assam and Bihar, two other
major rice-growing states. The drought- and flood-affected regions
together account for about 50 percent of the *kharif* (fall harvested)
rice planted area and production. Although rice is mostly irrigated in
the major surplus states of Punjab, Haryana, and West Uttar Pradesh,
increased transpiration due to above-normal temperatures and reduced
irrigation availability could stunt growth and reduce yields.

### Stocks Down Despite Record Government Procurement

Government-held rice stocks on July 1 are officially placed at 10.8
million tons, compared with 11.0 million tons a year ago, and are close
to the government's desired minimum buffer stock level of 10 million
tons. This is despite the fact that government rice procurement during
the MY 2003/04 marketing year was a record 22.4 million tons. Larger
offtake for domestic distribution and exports resulted in the reduction
in stocks, which are likely to further decline to below the government's
desired buffer stock level as of October 1 of 6.5 million tons.
Procurement during MY 2003/04 was largely from Punjab (8.7 mmt), Andhra
Pradesh (4.1 mmt), Uttar Pradesh (2.6 mmt), Chattisgarh (2.3 mmt),
Haryana (1.3 mmt), Orissa (1.2 mmt), and West Bengal (0.9 mmt). The
expected decline in rice production in major surplus states is likely to
result in lower rice procurement by the government in MY 2004/05.

### Exports Down but Not Out

Post continues to estimate CY 2004 rice exports at 2.5 million tons. The
ban on government allocation of subsidized rice for exports, in place
since August 2003, continues, and is unlikely to be lifted in the near
future because of lower government stocks and concerns about the drought
and its impact on production and procurement. However, there has been an
increase in private rice exports since March 2004 in response to high
international prices. Shipment data show that exports from January
through July 2004 have totaled around 1.3 million tons, mostly to Saudi
Arabia, Nigeria, South Africa, and other African countries. An estimated
400,000 tons of rice have moved to Bangladesh by sea, road, and rail
during this period, taking total Jan-Jul 2004 exports to 1.7 million
tons. Despite a likely decline in production in MY 2004/05, CY 2005
exports are forecast at 2.5 million tons due to possible larger road and
rail exports to Bangladesh, which was recently ravaged by severe floods
that resulted in significant crop losses.

## WHEAT

### Procurement Down

Government wheat procurement in MY 2004/05 (Apr-Mar) through July 2004
totaled 16.8 million tons, significantly below the government's earlier
expectations, reflecting lower production, which is currently estimated
by the government at 72.7 million tons. Wheat procurement was mostly
from the three surplus states of Punjab (9.2 mmt), Haryana (5.1 mmt),
and Uttar Pradesh (1.7 mmt).

### Drought Impact on Wheat Production

Although it is too early to forecast the 2005 wheat production, whose
planting does not begin until the fall, the prevailing severe drought
conditions in the wheat belt are not conducive for normal planting.
Although the wheat crop is mostly irrigated, poor rains will deplete
soil moisture and reduce irrigation availability from dams and wells.
Under a similar monsoon pattern in 2002, wheat production plummeted to a
seven-year low of 65 million tons in 2003.

### Exports Continue 

Although the government discontinued providing fresh allocations of
subsidized wheat for exports in August 2003, exports continue, albeit at
lower levels, mostly due to spill over from earlier contracts. According
to trade sources, some quantities of highly subsidized wheat meant for
the domestic public distribution system are leaking into export
channels. Hoping to get an export subsidy from the government, private
exporters had procured around 500,000 tons of wheat, which reportedly is
now sitting near ports. Some of this wheat might get exported even
without a government subsidy to countries in the Middle East and to
neighboring countries like Sri Lanka, mainly because of freight
advantage.

Although the government has repeatedly said that a grain export policy
is in the making, and that it will likely involve limited export
subsidies, nothing has been announced yet. In view of the growing
drought concerns, which would necessitate large quantities of wheat for
relief operations, it is unlikely that the government will encourage
wheat exports, at least in the near future. However, some wheat exports
to Bangladesh by road and rail might continue.

## COARSE GRAINS & PULSES

Poor rainfall in several major coarse grain growing states is likely to
result in a significant decline in coarse grain production. The drought
impact is likely to be more profound on millet, grown under
non-irrigated conditions in the worst drought-affected states of
Rajasthan and Haryana. There is likely to be some decline in the
production of sorghum and corn as well. The decline in coarse grain
production is likely to result in increased demand for wheat, which will
be required for drought relief operations in affected states.

At this stage the impact of the drought on *kharif* pulse production
(which typically accounts for about 38 percent of the total pulse
production) is unclear. In case the rice and coarse grain crops fail,
farmers might switch to short duration pulse crops, offsetting some of
the earlier losses. However, if the rain completely fails in north,
west, and central India, the *rabi* (winter season) pulse production,
which includes mostly chickpeas, lentils, and peas, will be in jeopardy,
necessitating larger imports in MY 2004/05.

# SECTION II - STATISTICAL TABLES

## Table 1: Commodity, Rice, PSD

+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| **PSD Table**     |     |     |     |     |     |     |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| **Country:**      | ### |     |     |     |     |     |           |
|                   | ### |     |     |     |     |     |           |
|                   |  In |     |     |     |     |     |           |
|                   | dia |     |     |     |     |     |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| **Commodity:**    | *   |     |     |     |     |     |           |
|                   | *Ri |     |     |     |     |     |           |
|                   | ce, |     |     |     |     |     |           |
|                   | Mi  |     |     |     |     |     |           |
|                   | lle |     |     |     |     |     |           |
|                   | d** |     |     |     |     |     |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
|                   |     | **  |     | **  |     | **  | UOM       |
|                   |     | 200 |     | 200 |     | 200 |           |
|                   |     | 2** |     | 3** |     | 4** |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
|                   | Old | New | Old | New | Old | New |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| **Market Year     |     | *   |     | *   |     | *   | (MO       |
| Begin**           |     | *Oc |     | *Oc |     | *Oc | NTH/YEAR) |
|                   |     | t-0 |     | t-0 |     | t-0 |           |
|                   |     | 2** |     | 3** |     | 4** |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Area Harvested    | 40, | 40, | 44, | 44, | 44, | 42, | (1000     |
|                   | 000 | 400 | 000 | 000 | 500 | 500 | Hectares) |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Beginning Stocks  | 24, | 24, | 11, | 11, | 10, | 10, | (1000 MT) |
|                   | 480 | 480 | 000 | 000 | 900 | 900 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Milled Production | 72, | 72, | 86, | 86, | 90, | 80, | (1000 MT) |
|                   | 700 | 700 | 400 | 400 | 000 | 000 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Rough Production  | 1   | 1   | 1   | 1   | 1   | 1   | (1000 MT) |
|                   | 09, | 09, | 29, | 29, | 35, | 20, |           |
|                   | 061 | 061 | 613 | 613 | 014 | 012 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Milling           | 6,  | 6,  | 6,  | 6,  | 6,  | 6,  | (1000 MT) |
| Rate(.9999)       | 666 | 666 | 666 | 666 | 666 | 666 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL Imports     | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT) |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Jan-Dec Imports   | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT) |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Jan-Dec Import    | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT) |
| U.S.              |     |     |     |     |     |     |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| **TOTAL SUPPLY**  | 97, | *   | 97, | *   | 1   | *   | (1000 MT) |
|                   | 180 | *97 | 400 | *97 | 00, | *90 |           |
|                   |     | ,18 |     | ,40 | 900 | ,90 |           |
|                   |     | 0** |     | 0** |     | 0** |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL Exports     | 5,  | 5,  | 2,  | 2,  | 2,  | 2,  | (1000 MT) |
|                   | 440 | 440 | 750 | 750 | 750 | 750 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Jan-Dec Exports   | 4,  | 4,  | 2,  | 2,  | 2,  | 2,  | (1000 MT) |
|                   | 421 | 421 | 500 | 500 | 500 | 500 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL Dom.        | 80, | 80, | 83, | 83, | 86, | 80, | (1000 MT) |
| Consumption       | 740 | 740 | 750 | 750 | 500 | 000 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| Ending Stocks     | 11, | 11, | 10, | 10, | 11, | 8,  | (1000 MT) |
|                   | 000 | 000 | 900 | 900 | 650 | 150 |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+
| **TOTAL           | 97, | *   | 97, | *   | 1   | *   | (1000 MT) |
| DISTRIBUTION**    | 180 | *97 | 400 | *97 | 00, | *90 |           |
|                   |     | ,18 |     | ,40 | 900 | ,90 |           |
|                   |     | 0** |     | 0** |     | 0** |           |
+-------------------+-----+-----+-----+-----+-----+-----+-----------+

## Table 2: Commodity, Wheat, PSD

  ------------------- ----------- ------------ -------- ------------ -------- ------------ --------------
  **PSD Table**                                                                            

  **Country:**        **India**                                                            

  **Commodity:**      **Wheat**                                                            

                                  **2002**              **2003**              **2004**     UOM

                      Old         New          Old      New          Old      New          

  **Market Year                   **Apr-02**            **Apr-03**            **Apr-04**   (MONTH/YEAR)
  Begin**                                                                                  

  Area Harvested      25,900      25,900       25,900   25,900       27,300   27,300       (1000
                                                                                           Hectares)

  Beginning Stocks    23,000      23,000       15,700   15,700       6,900    6,900        (1000 MT)

  Production          71,810      71,810       65,100   65,100       72,000   72,700       (1000 MT)

  TOTAL Mkt. Yr.      34          34           20       20           20       20           (1000 MT)
  Imports                                                                                  

  Jul-Jun Imports     19          19           20       20           20       20           (1000 MT)

  Jul-Jun Import U.S. 10          10           0        0            0        0            (1000 MT)

  **TOTAL SUPPLY**    94,844      **94,844**   80,820   **80,820**   78,920   **79,620**   (1000 MT)

  TOTAL Mkt. Yr.      5,300       5,300        5,500    6,700        1,500    1,500        (1000 MT)
  Exports                                                                                  

  Jul-Jun Exports     6,100       6,100        5,000    5,800        1,000    1,000        (1000 MT)

  Feed Dom.           600         600          600      600          500      500          (1000 MT)
  Consumption                                                                              

  TOTAL Dom.          73,844      73,844       68,420   67,220       69,920   72,620       (1000 MT)
  Consumption                                                                              

  Ending Stocks       15,700      15,700       6,900    6,900        7,500    5,500        (1000 MT)

  **TOTAL             94,844      **94,844**   80,820   **80,820**   78,920   **79,620**   (1000 MT)
  DISTRIBUTION**                                                                           
  ------------------- ----------- ------------ -------- ------------ -------- ------------ --------------

## Table 3. Government Procurement, Stocks, and Offtake of Rice (a year ago)

**(Million metric tons)**

+-------------+--------------+--------------+-----------+------------+
|             | **Stocks**   | **P          | **        | **Offtake  |
|             |              | rocurement** | Imports** | \***       |
|             |              |              |           |            |
|             |              | **           |           |            |
|             |              | Cumulative** |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Jul 1,    | 11.0 (21.9)  |              |           | 2.9 (2.1)  |
| 2003**      |              |              |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Aug 1**   | 8.1 (20.1)   |              |           | 1.0 (2.5)  |
+-------------+--------------+--------------+-----------+------------+
| **Sep 1**   | 7.1 (17.5)   | 16.4 (21.3)  |           | 1.9 (1.9)  |
|             |              | **1/**       |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Oct 1**   | 5.2 (15.8)   |              |           | 1.9 (2.0)  |
+-------------+--------------+--------------+-----------+------------+
| **Nov 1**   | 5.7 (20.5)   |              |           | 1.5 (1.6)  |
+-------------+--------------+--------------+-----------+------------+
| **Dec 1**   | 10.9 (20.3)  |              |           | 1.5 (1.8)  |
+-------------+--------------+--------------+-----------+------------+
| **Jan 1,    | 11.7 (19.4)  |              |           | 1.9 (1.8)  |
| 2004**      |              |              |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Feb 1**   | 12.4 (18.8)  |              |           | 1.6 (1.6)  |
+-------------+--------------+--------------+-----------+------------+
| **Mar 1**   | 13.6 (26.0)  |              |           | 2.0 (2.4)  |
+-------------+--------------+--------------+-----------+------------+
| **Apr 1**   | 13.1 (17.2)  |              |           | 1.4 (1.6)  |
+-------------+--------------+--------------+-----------+------------+
| **May 1**   | 12.7 (15.3)  |              |           | 1.6 (2.4)  |
+-------------+--------------+--------------+-----------+------------+
| **Jun 1**   | 12.3(13.2)   |              |           | 1.5 (2.4)  |
+-------------+--------------+--------------+-----------+------------+
| **Jul 1**   | 10.8 (11.0)  | 22.4 (16.4)  |           |            |
|             |              | **2**/       |           |            |
+-------------+--------------+--------------+-----------+------------+

**1/** Cumulative procurement: October 1, 2002 to September 30, 2003

**2/** Cumulative procurement: October 1, 2003 to July 26, 2004

## Table 4: Government Procurement, Stocks, and Offtake of Wheat (a year ago)

**(Million metric tons)**

+-------------+--------------+--------------+-----------+------------+
|             | **Stocks**   | **P          | **        | **Offtake  |
|             |              | rocurement** | Imports** | \***       |
|             |              |              |           |            |
|             |              | **           |           |            |
|             |              | Cumulative** |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Jun 1,    | 26.6 (41.3)  |              |           | 2.3 (1.6)  |
| 2003**      |              |              |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Jul 1**   | 24.2 (41.1)  |              |           | 2.3 (1.5)  |
+-------------+--------------+--------------+-----------+------------+
| **Aug 1**   | 22.4 (39.7)  |              |           | 1.7 (2.4)  |
+-------------+--------------+--------------+-----------+------------+
| **Sep 1**   | 20.7 (37.9)  |              |           | 2.3 (2.2)  |
+-------------+--------------+--------------+-----------+------------+
| **Oct 1**   | 18.4 (35.6)  |              |           | 2.0 (2.3)  |
+-------------+--------------+--------------+-----------+------------+
| **Nov 1**   | 16.4 (33.1)  |              |           | 1.8 (1.7)  |
+-------------+--------------+--------------+-----------+------------+
| **Dec 1**   | 14.6 (31.3)  |              |           | 1.9 (2.4)  |
+-------------+--------------+--------------+-----------+------------+
| **Jan 1,    | 12.7 (28.8)  |              |           | 1.8 (2.4)  |
| 2004**      |              |              |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Feb 1**   | 11.0 (21.3)  |              |           | 1.7 (2.7)  |
+-------------+--------------+--------------+-----------+------------+
| **Mar 1**   | 8.6 (18.6)   | 15.8 (19.0)  |           | 1.9 (2.9)  |
|             |              | **1/**       |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Apr 1**   | 6.9 (18.6)   |              |           | 1.3 (1.6)  |
+-------------+--------------+--------------+-----------+------------+
| **May 1**   | 19.0 (26.0)  |              |           | 1.1 (1.9)  |
+-------------+--------------+--------------+-----------+------------+
| **Jun 1**   | 19.4 (26.6)  |              |           |            |
+-------------+--------------+--------------+-----------+------------+
| **Jul 1**   | 19.2 (24.2)  | 16.8 (15.8)  |           |            |
|             |              | **2/**       |           |            |
+-------------+--------------+--------------+-----------+------------+

\* Includes exports

**1/** Cumulative procurement: April 1, 2003 to March 31, 2004

**2/** Cumulative procurement: April 1, 2004 to July 26, 2004