Is World Hunger About To Start In India?

It's already been a tough year for Indian farmers, with monsoon rains 27% below normal June 1 to Aug. 18, according to Reuters.

In the cane growing north west things are even worse, here rains are 37% lower in the period that normally provides around three quarters of the nations rainfall for the entire year.

The government are playing down the seriousness of the situation in the run-up to the elections, despite an alarming increase in suicides in rural communities, in a country where up to 70% of the population are dependent on farm incomes.

There's no need to press the panic button yet, the government have re-assured the people, saying that they will release around 5.5 MMT of wheat and rice from state reserves to stem rapidly rising domestic food prices.

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

That might sound like a lot, but in a country with a population the size of India (circa 1.1 billion) it represents less than two and a half months worth of rice consumption and less than five months supply of wheat.

Last week the USDA cut it's estimate of rice production this season by 15.5 MMT from it's July prediction to 84 MMT, around 9 MMT lower than domestic consumption.

There is no official word yet on wheat production estimates for 2010's crop which will be harvested next March/April. With wheat demand forecast to rise, due to shortfalls in rice production, that 31.62 MMT is going to start disappearing very rapidly in a country that normally consumes around 6.5 MMT of wheat a month.

Various media reports suggest that there is virtually no wheat left in private hands in India.

Lets do a little bit of random Nogger maths...

Wheat stocks 31.62 MMT divided by consumption of 6.5 MMT = 4.86 months of supply from the end of July, ie enough to last until Christmas.

That leaves India having to buy all it's domestic wheat requirements for at least Jan/Feb, and probably some of it's March needs too, lets say half of March, that comes to 16.25 MMT.

And suppose that wheat production is down on the back of the poor monsoon season? India only normally just about manages to cover it's own 77 MMT domestic requirement as it is.

We are starting to talk telephone numbers here.

They might need 16.25 MMT just to get them through to next harvest, plus next season could throw up a deficit, and all of that is still without building any reserve stocks whatsoever. And we haven't even factored in any extra demand yet either.

Blimey. Oh, and they've got no cash. And erm, the storekeepers might be lying, and there might not be 31.62 MMT in store at all. Why not buy it all on Milk Link terms?

"Hello, it's Milk Link Mumbai office here, yes it is very hot isn't it. I'd like to try 6.5 MMT of your free wheat every month for six months. If we like your wheat then we'll take an option to pay for it after that. No, don't hang up, I'll have 10 MMT of rice and you can throw in a pickle tray as well. You do deliver don't you?"