India - It's Starting

The Indian government is set to release up to 5 MMT of wheat and rice from it's strategic reserves onto the domestic market, according to Indian media reports.

The move will come in an attempt to stem recent price rises due to shortages of supply of both commodities on the open market ahead of the festival season, they say.

According to the reports the government held 18.79 MMT of rice and 31.62 MMT of wheat in reserves as at the end of July.

Now here's an interesting thought, local reports suggest that there is virtually no wheat left in private hands in India, it all belongs to the government after they emerged as aggressive buyers back in March/May when the crop was harvested.

Domestic wheat consumption is seen at just shy of 77 MMT in 2009/10 according to the USDA, which equates to almost 6.5 MMT/month, and that's before we factor in any increase in demand due to a shortage of rice.

If the government's stocks really were 31.62 MMT (and they may well have been less in reality, you know what those boys are like, it's not easy to nail wheat to the floor so it doesn't "go away") at the end of July, that's only five months supply, meaning that wheat in India will run out by Christmas.

And harvesting doesn't start until March.

No wonder the government are having to have their arms twisted to let some wheat go now. And where is the money going to come from to import the stuff in the new year?