USDA’s India Estimates Are Bogus

Below are two articles from Commodity Online, posted within twenty minutes of each other. The first one reports that USDA revises India's March wheat output upwards.

(emphasis mine) [my comment]

USDA revises India's March wheat output
2009-04-13 12:30:00
Commodity Online

The US Department of Agriculture (USDA) has revised India's wheat output slightly upward at 78.6 million tones in March from 78.4 million tones in February.

If the USDA projections come true
[we already know they won't], India will be harvesting a bumper crop for the second consecutive year. The country had produced a record 78.57 million tones last year, which had helped the government to procure over 22.6 million tones for the public distribution system.

The US seems to be more positive about India's wheat harvest as it projects higher output at 78.6 million tones for 2008-09, compared with the Indian government's estimate of 77.78 million tones.

Meanwhile, the Indian government is yet to revise its second advance estimate, which was released much before the harvest season, though officials have expressed that the output would be higher than 77.78 million tones. Wheat harvesting has already commenced from mid-March.

Major wheat growing states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan and Madhya Pradesh.

Besides India, USDA has also marginally increased the estimates for Australia, Morocco, Mexico and Bangladesh.

The estimate for global wheat production has also been raised by 1.6 million tunes to a record 684.4 million tones during marketing year 2008-09, it said. The marketing period of wheat varies from country to country.

The second one confirms widespread, extensive damage to India's wheat crop from recent rain.

Unseasonal rains force Punjab trim wheat output
2009-04-13 12:10:00
Commodity Online

CHANDIGARH : Unseasonal rains in Punjab causing widespread damage to its wheat crop has forced it to cut down its estimates of wheat output by five lakh metric tonne to 150 lakh MT during this season.

According to Punjab Agriculture Department,
wheat production in the state will even cross 150 lakh MT marks because of heavy damage inflicted by rains and hailstorm.

Punjab had earlier estimated wheat production at 155 lakh MT for this Rabi marketing season against last year's output of 157.20 lakh MT.

Besides, the total crop arrival during this Rabi marketing season is also expected to be lower at 100 lakh MT against the last year's arrival of 105 lakh MT, a development that could also affect the centre's procurement target from the state, wheat experts said.

Unexpected rains during the past one week have hit the wheat crop badly across several parts of the region.

According to the department,
the wheat crop sown over an area of 23,400 hectares in the state has been adversely affected due to rains and hailstorm.

Wheat crop has been affected in Ludhiana, Ferozepur, Fatehgarh Sahib, Jalandhar, Mansa, Amritsar, Sangrur, Tarantarn and Gurdaspur.

As per initial reports, rains have caused damage in the range of 50 to 75 per cent to wheat crop cultivated on 5,400 hectares and 75 to 100 per cent damage on 2,500 hectares while rest of the total area faced less than 50 per cent damage. [Damage to India's wheat crop confirmed]

Because of the rains playing spoilsport, the arrival of wheat during the current wheat lifting season would also shrink as a result of which,
the target of 115 lakh MT of wheat procurement from Punjab may not be achieved, as per wheat experts.

The Centre during the ongoing rabi marketing season is expecting to procure 115 lakh MT of wheat from Punjab.

My reaction: USDA Estimates For India's Wheat Output Are Bogus.

1) The USDA has revised India's wheat output slightly upward to 78.6 million tons in March.

2) Punjab Agriculture Department reports that the state's wheat crop has been heavily damaged by rains and hailstorm.

3) According to initial reports, rains have caused damage in the range of:

A) 75 to 100 percent to wheat crop cultivated on 2,500 hectares
B) 50 to 75 percent to wheat crop cultivated on 5,400 hectares
C) 0 to 50 percent to wheat crop cultivated on 15,500 hectares

4) India's target of 11.5 million tons of wheat procurement from Punjab may not be achieved.

Conclusion: USDA is overly optimistic with most of its numbers. Expect estimates, especially for India, to be revised lower repeatedly in the next few weeks.

This entry was posted in Food_Crisis, India, Market_Skepticism, News_Developments. Bookmark the permalink.

5 Responses to USDA’s India Estimates Are Bogus

  1. Anonymous says:

    with the shortages you speak of Eric, how do we trade this? Anyone know of a good investment vehicle for agriculture?

  2. dashxdr says:

    Eric could you mix the numbers of the two articles together? In the first article there are estimates in metric tons of the total India wheat production. In the second there are different terms describing likely damage to areas. Specifically how many hectares are devoted to wheat production over all of India? Knowing that we can figure out how bad the damage is.

  3. Mark says:

    23.400 hectares x 2.65 tonnes/hectare x 0.5 (approx loss "efficiency")

    That gives an approximate loss of 31.000 tonnes. That's nowhere near the 5 lakh MT (500.000 tonnes).

    Where is my error?

  4. Jeff Burton says:

    There are a number of agricultural ETF's. I hold some DBA. "Paper Food".

  5. EPC says:

    Eric, I don't know if the USDA's India estimates need necessarily be "bogus". It looks like the total acreage dedicated to wheat in the state of Punjab is 23,400 acres: "the wheat crop sown over an area of 23,400 hectares in the state". Now, a hectare is an area of just 100 meters by 100 meters, or 1/100 of a square kilometer (or 2.5 acres).

    So the entire wheat acreage of Punjab apparently amounts to just 234 square kilometers, or an area about 9.5 _miles_ square. So the wheat acreage affected -- and not all of it has been destroyed (only about 8,000 hectares will be lost, or about 1/3) -- is only about that of one small county in the Midwest of the U.S.

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