Indian market proves global wildcard

India has recently planted their largest wheat area on record at 74.1 million acres, and this crop is due to commence being harvested around the end of February leading into March.

On the back of favourable monsoon rains this year, there is the expectation that this will be a record wheat crop for them, with production estimates anticipated to be upwards of 95mt, with some estimates as high as 100mt.

Given India's own usage requirements are about 76mt per year, this will likely lead to a potential surplus of about 20mt this season.

It is reported that, as at October 1, 2013, India wheat stocks had currently reached 36.1mt, much higher than the government target of 11mt.

With this season's anticipated surplus of 20mt due to come on stream, this will lead to a potentially exportable stockpile and surplus of over 56mt.

Putting this into context is the recent USDA world wheat ending stocks figure is estimated to be 185.4mt.

India's significant contribution to the anticipated record world wheat production and supply situation is partly attributable to last week's bearishly wheat USDA report.

Notwithstanding this, part of India's challenge with such a large wheat crop, as do the other major exporting countries, is freighting the grain to port, with not only tight warehousing issues, and lack of rail cars to adequately manage carting several competing commodities (like wheat, rice and corn), but also the ongoing weather challenges with monsoonal rains, from June to September, too. It will be interesting to see how this unfolds over the next few months, once their harvest commences.

Closer to home, we have finished harvesting our record WA wheat crop now and understandably we will have a large carryout here in WA too.

Fortunately, pricewise we have been largely insulated with the benefit of the drop in the AUD over the past few months, so we are not sitting at three-year lows like Chicago.

Earlier this week, March wheat was trading at 563c/bu.

Josh Reece-Hands is a senior broker with Grain Brokers Australia