India back in a sweet spot on wheat and rice stocks after years of volatility: Somnath Chatterjee

India has set an ambitious target of producing over 354 million tonnes of food grains in the 2025–26 crop year, starting in July. This projection follows the Indian Meteorological Department’s forecast of above-normal rainfall across much of the country.

In the ongoing rabi marketing season, wheat procurement has already surpassed 29 million tonnes—the highest level in four years—driven by bumper harvests. The government remains confident of reaching its goal of procuring 33 million tonnes of wheat.

Meanwhile, soybean prices have surged after the United States and China agreed to a significant tariff reduction for a 90-day period. The US will reduce duties on Chinese goods from 145% to 30%, while China plans to cut tariffs on American goods from 125% to 10%.

To explore the future of India’s agricultural sector, CNBC-TV18 spoke with Somnath Chatterjee, CPO at ITC Food Division; Sudhakar Desai, CEO of Emami Agrotech and President of IVPA; and Kapil Nema, Deputy Executive Director of the Sugar Business at Dalmia Bharat.

Below is an excerpt of the discussion.

Q: The government seems quite confident about the wheat crop and procurement. What’s your perspective?

Chatterjee: Indeed, it’s been a rollercoaster for commodity buyers like us. We initially feared an early onset of summer, and the period post-Diwali is always worrisome for the wheat crop, as a sudden temperature spike can affect it. However, we were fortunate to get a bumper crop, and as evident from the government’s procurement numbers, we’ve reached 29 million tonnes. I believe 31 million tonnes is within reach.

This means that after two to three years, we will be quite comfortable with our wheat stock as a country. There are no plans for imports at the moment. With such a crop, the government will have enough in its granaries to meet all PDS and other allocations.

Interesting developments have taken place. For instance, the Government of India issued three to four months of PDS supply due to border tensions, ensuring the public’s confidence that India has enough food grains.

Regarding food security and wheat availability, we have about 31 million tonnes, which is higher than the level prescribed under the Food Security Act.

However, this number was based on the 2012 census, and a new census is likely within the next year. When that happens, the required safety stock number may increase. All in all, we are in a comfortable position. The private trade has procured enough wheat. So, in terms of wheat and rice, India is in a good position.

Q: With the government targeting 115 million tonnes this year and 117 million tonnes next year, what does this mean for the trade?

Chatterjee: It’s positive. Consumption has been rising. During recent border tensions, one of India’s strengths was having a large stock of food grains and other food articles to sustain any crisis. This was also evident during COVID when full granaries helped millions of our countrymen.

After two to three years of precarious crops and high wheat prices, we are finally in a good place. If the monsoon is favourable, as predicted by Skymet and IMD, with 105% to 106% of the long-period average and good spatial and temporal distribution, our dams and catchment areas should fill up. This would benefit both the kharif and rabi crops.

Q: Your reaction to the US-China trade truce? China is a significant buyer, and the price reaction in international markets. What does this mean for the edible oil sector?

Desai: With China crushing 100 million tonnes, it’s definitely a market mover. The recent tariff reduction, following a 145% surge, means a lot of grain and beans previously in limbo may now have clarity. This is good news for global trade in this space.

China typically buys about 60-70 million tonnes from Brazil and around 25-26 million tonnes from the US. So, this trade resumption is positive.

However, US tariff revenues have increased from $6.6-$7 billion to about $15 billion due to higher tariffs. While this may not immediately lead to US inflation because crude prices are down, it’s creating an import fund.

Within the soybean complex, this is good news. Trade flows that were previously disrupted may get back on track.

Q: The USDA report shows good crops in Argentina and Brazil, but global stocks and US output are slightly weak. Is there a balance, or is this bullish for the sector?

Desai: The USDA report at the production level is neutral. They showed 4-5% lower acreage but compensated with higher yields. Surprisingly, they put ending stocks 15% lower, making the market bullish for beans, soymeal, and eventually oil.

A key factor is the biofuel policy. It suggests the US will maintain or improve it, but whether used cooking oil (UCO) and canola go into biodiesel is unclear. This affects about 15-16 million tonnes of biodiesel consumption.

If UCO is excluded and only canola and soybean are used, it would be bullish for both Chicago and soy oil.

1. Globally, Brazil’s production is at 169 million tonnes, Argentina at 49, and the US around
2. That’s about 20-25 million tonnes more soybean crop, but only half a million tonnes more oil, easily offset by the drop in UCO. Demand for soybean oil remains strong.

So, I see bullish beans and bullish oil, but the big question is the biofuel policy. We’ll get more clarity at the meeting on May 20.

Q: You mentioned used cooking oil. What’s the global market for it? Is India a strong player?

Desai: No, not really. India’s share is very negligible. In China, there was used cooking oil, but it faced objections from the US and Europe. So that’s a different scenario altogether.

Q: Let’s talk about Indian markets. What are your expectations for imports in May and June? And what about demand growth in edible oil?

Desai: Looking at domestic oilseeds, the mustard crop appears firm, although crop size estimates vary. We expect harvest pressure for a month or so. Indian stocks are tight due to sharp corrections in the palm market. People were buying hand to mouth. Now that palm prices have adjusted, India will buy and stock up.

Domestically, the government bought around 18 million tonnes of soybean and has been releasing 300,000-400,000 tonnes into the market. Consumption is a bit uncertain; it’s hard to tell if demand is neutral, up, or down, but inventories have come down, and palm forwards now look attractive. So, buying has resumed.

We expect India will need around 1.2 million tonnes of imports over the next three months, including about 700,000 tonnes of palm per month and 200,000 tonnes of sunflower oil. Global supply is consolidated and stable, and Indian demand will be steady. Much depends on biofuel policy and how much soy can rally above palm.

This article has been republished from The CNBC TV18.