*****THE TRUTH ABOUT INDIA’S WHEAT RESERVES*****

It is always a little unsettling to be the only person on one side of an issue, which was the situation I found myself last spring. While virtually all media stories were reporting a "bumper wheat harvest" for India of "almost 80 million (800 lakh) tones", I was writing about India's wheat harvest being a complete disaster.

(emphasis mine) [my comment]

Wind, rain, and hail ruined India's wheat crop. India's policy of buying all wheat at the same price, "whatever the quality", has made the situation worse by encouraging farmers to focus on quantity rather than edibility. Furthermore, grain reserves overflowing with rotting wheat means that the already poor quality of India's harvest will be worsened due to lack of storage space. Finally, big companies have been holding off purchases due to misguided deflation fears, which means a lot of pent up demand chasing a lot of "discolored and shriveled" wheat.

India is now left with large stockpiles of rotting, inedible wheat and a harvest that is a complete disaster.

Then on May 18, I went further and explained the truth about India's wheat reserves.

India has announced the export of to allow 2 million Tonnes of wheat exports after elections. This is unlikely to happen. [it didn't]

Under the FCI Act, the India's government is obliged to buy all the wheat, "whatever the quality", that comes to the mandis in traditional states where purchases are made. Under India's system, a large harvest of rotting wheat is worth more than a smaller harvest of edible wheat. Simple logic dictates that buying wheat, "whatever the quality", will over time lead to the buildup of large inventories of rotting, inedible wheat.

Just like US banks with their toxic securities, India doesn't want to face the truth about its wheat reserves. Rather than dispose of its inventory of inedible wheat, India wastes valuable storage space stockpiling more of it every year. India's grain reserves, like the balance sheets of US banks, have become filled with worthless assets.


Conclusion:
The amount of edible wheat in FCI warehouses is much, much smaller than India's "official" wheat reserves. India can't export inedible wheat, and it does not have enough edible wheat to afford exporting it. Even If India does export 2 million tons of wheat, it will have to then import 2 millions of wheat later (at a higher price) due to its insufficient stockpiles of edible wheat.

The solution to India's overflowing granaries is not exporting grains,
but disposing of its large stockpiles of rotten wheat.

For this reason, it is refreshing to see the media start to focus on the true state of India's wheat reserves.

THE TRUTH ABOUT INDIA'S WHEAT RESERVES

Nogger reports The Truth Behind India's Wheat Stocks. (visit Nogger's blog to keep up to date about the developing 2010 food crisis. It's a great source of info for everything agriculture.)

Monday, 22 March 2010
The Truth Behind India's Wheat Stocks

Well, well, well, who'd have thought it eh? Just call me Sherlock and leave it at that.

An Indian TV reporter has stumbled across wheat in Punjab worth 15 crores (a crore is Indian for a bloody big number, 15 of them is around USD3.3 million), in what can only be described as a bit of a state. We're talking a not even fit for the cat kind of a state.

Agriculture Minister Sharad Pawar, nice lad that he is, has promised to look into it and said that he might even consider going to the extraordinary lengths of hiring a warehouse to put his wheat into in the future!

This is the same Sharad Pawar who only last week ruled out exports of government owned wheat, we can see why now because who'd want to pay good money for this?

Yes, I've got some pics for you, but I'm going to make you wait a bit longer yet.

And this is only the tip of the iceberg, or in this case the tip of an enormous pile of "cack" to use a technical term.

"Across the state, at different government warehouses, wheat grain worth 500 to 800 crores is rotting away," says the report. To save you reaching for the calculator that's USD110-175 million.

Of around 7.2 MMT of wheat in store in Punjab, that's around half of the country's buffer stocks, 6.5 MMT is being stored outside in conditions like this. I wonder what conditions the other half are being stored in? Exactly the same no doubt. That would mean that around 90% of India's 2009/10 ending wheat stocks potentially look like this:


Video Nasty

Other links: here and here

NDTV reports that Food grain rots in Punjab as prices soar.

Food grain rots in Punjab as prices soar
Vikram Chowdhary, Wednesday March 17, 2010, Chandigarh

Grain down the drain (Punjab: 2007-2010)

— 72 lakh metric tonne of wheat grain stored
— 65 lakh metric tonne of wheat grain lying in the open

— Wheat grain worth Rs 500 cr to Rs 800 cr rotting



Millions of metric tons of wheat grain, lying in the open, being eaten by insects. This quantity of wheat is worth Rs 15 crores. A whopping 90 per cent of it is not fit for human consumption now.

This is the shameful math of a government storage facility in Srihand in Punjab, but it's not an isolated story. Across the state, at different government warehouses, wheat grain worth 500 to 800 crores is rotting away. In the last three years, 72 lakh metric tonnes of grain has been bought from farmers. Most of that is lying in the open because there's just not enough storage space.

''Unfortunately there has been no movement of these food grains going outside the state. There are no railway wagons available. And the Government of India is not sending this food out of Punjab,'' says Punjab's Finance Minister, Manpreet Badal.

Others try to defy what's obvious - a colossal and unaffordable waste. ''The shelf life of wheat stored in open is not more than one year. But this what is lying here is two years old. This is the crop of 2008,''
says Dr Bhupinder Singh, Joint Director, Food & Civil Supplies, Punjab.

Things will only get worse if that doesn't change. Punjab is heading for a bumper crop [IF you believe the India government's numbers (the same government who has been hiding India's wheat reserves)]. The harvest begins next month. While the government figures out where to put it, consumers are dealing with food prices that pose a greater challenge every month for households all over the country.

Food rots as millions go hungry:

— 50% of the world's hungry live in India
— Over 20 crore people hungry
— India ranks 65th in the world in battling hunger

Source: International Food Policy Research Institute

Food damaged in 10 years (1997-2007)

— 10 lakh tonnes of foodgrain damaged
— 10 lakh tonnes can feed 1 crore people for 1 year
— 3.95 lakh tonnes of rice
— 1.83 lakh tonnes of wheat

Each year:

— Rs 50,000 crore of food wasted
— 10.5 percent of India's total food grain production wasted

Source: FCI


Counter Currents reports that millions go to bed hungry as millions of tonnes of wheat rot.

Millions Go To Bed Hungry As Millions Of Tonnes Of Wheat Rot In Open In Punjab
By Devinder Sharma

20 March, 2010

Ground Reality

Wheat lying in the open in Sirhind, Punjab. NDTV photo

As you drive through Punjab, stored wheat lying in the open is a usual sight. For at least three decades now, you have been seeing wheat stacked in the open facing the vagaries of the inclement weather. You have got used to it.

I was therefore pretty surprised when CNN-IBN and NDTV decided to take on the issue prominently in their prime time bulletins. I remember, two decades back, when I was the Agriculture Correspondent of the Indian Express, and based in Chandigarh, stored grain in the open was quite a frequent picture on the front page. My photographer colleague Swadesh Talwar and I had travelled quite extensively, and we did highlight the sad plight of rotting foodgrains time and again.

I must acknowledge that our efforts did not succed in making the official machinery, deep in slumber, wake up and do something meaningful. Ninety per cent of the procured grains still lies in the open.

In other words, the criminal neglect of foodgrain continues. What makes it a heinous crime is that those who are at the helm of affairs do not realise that these rotting stocks could have fed several million hungry. Even in Punjab, the frontline agricultural State in India, millions are faced with hidden hunger if not starvation.


Punjab, the food bowl of India, fares much below Sudan in the IFPRI Hunger Index.


For three decades now, the government has failed to act. I don't know what it means when Agriculture Minister Sharad Pawar says that he will hold an enquiry. Ever since I had been on the foodgrain chase, I have heard this promise time and again.
For a sound-byte hungry journalism, these statements come in handy while reporting, but after the next story takes over, the bytes are all but forgotten. I hope CNN-IBN and NDTV do not let the issue die down once again.

My reaction: The truth about India's wheat reserves is finally surfacing.

1) Around 90% of India's 2009/10 ending wheat stocks lies in the open and is no longer fit for human consumption

2) The shelf life of wheat stored in open is not more than one year, which means most of India's reserves has long since rotted away. Rather than dispose of this growing inventory of inedible wheat, India wastes valuable storage space stockpiling more of it every year.

3) To make matters worse,
India's policy of buying all wheat at the same price regardless of its quality has been encouraging farmers focus on quantity rather than edibility. This means that most of India's wheat reserves were already of poor quality (if not inedible) at the time of harvest.

4) This explains why India has been extremely reticent to release its stocks despite spiraling food price infla tion: they don't exist!

5) It took persistent double digit food inflation to finally focus the Indian media's attention on the country's rotting wheat reserves.


They too are supposed to have huge government reserves, yet despite spiraling food price inflation the authorities have been extremely reticent to release these stocks onto the market at anything like a sensible price.


Prediction: The USDA will completely ignore the news and pretend that all of India's wheat reserves still exist (like it did with the recent revelations from the USDA's attache in China that last season's crop was probably overstated to the tune of 8.5 MMT)


Conclusion: The world is heading towards an unprecedented food crisis in 2010. Once food inflation picks up in the US and around the world and the media begins to turn their attention to the problem, everyone will be horrified to learn that no one has any grain reserves. Then you will see TRUE panic. Panic which the can't waive its magic (money-printing) wand and make go away.

I am flying to Russia on Thursday (stayed in US longer than I planned), and I am not coming back anytime soon. Things are moving along well with the fund I launched to Invest in Russian Black Earth farmland.

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

9 Responses to *****THE TRUTH ABOUT INDIA’S WHEAT RESERVES*****

  1. dashxdr says:

    If every year for 30 years India's wheat reserves have been stored poorly so 90% of it is rendered useless, why is this an issue all of a sudden?

    Sounds like now that India is aware of it things might get better, all they need to do is set up better storage systems.

  2. stibot says:

    Similar thoughts to dashxdr's. Seems to me not a problem in India at all, article only reviews their customs which you are not used to.

  3. dashxdr says:

    Psychopath come back!

    Wow the dollar index went up .99 to 81.81 right at the moment. Psychopath claimed it would return to 82, and I argued that is irrelevant to the gold price because the dollar index is just a measurement of paper (fiat) currency to other paper (fiat) currency.

    The Powers That Be constantly try to hoodwink the herd into thinking a rising dollar index reflects negative perception of gold.

    Even though I made the case against that premise, and it was clear to me Psychopath was spouting the typical propaganda (he shut up awfully quick when I pointed out the true nature of the dollar index. Strange, that...), I never really expected the dollar index to reach 82 again in my lifetime. It chafes my rear thinking Psychopath might actually have been correct about something.

    Poor Euro. This whole Greek thing is taking its toll.

  4. dashxdr says:

    Or, conversely, is the rise in the dollar index a calculated manipulation in order to dupe people into thinking the public (and the world) is highly supportive of the US dollar now that Obamacare seems to have passed?

    Truth be told nationalized health care can only create ever increasing budget deficits, demanding ever more money printing and monetization of the debt, which is anything but supportive of a strong dollar.

    The Plunge Protection Team seems to use a tactic of time a big manipulation with some big news event, and the manipulation is structured to be the opposite of conventional wisdom. The expectation would be every rational person would be surprised at what the market response was, and so might think, "Hmmm. Maybe everyone else is right and I'm wrong."

    Step #1: Induce all rational people to hopelessly doubt their own sanity and instincts.

    Because the only real enemy to the corrupt powers that be is that tiny minority of rational people. One need have no fear of the irrational herd.

  5. dashxdr says:

    @pinnion

    Psychopath was the one who always kept alluding to someone coming along and shooting me in the back of the head. He also was LOLAnon. The one who kept putting "LOL!" in his posts. He claimed the dollar index would hit 82 again. And d*mned if we're not close.

    Remember all the "I'm from Ding Dong province in China, we're burning our wheat for fuel we have so much of it..."

    Fun stuff.

    I assert the dollar is going to zero value in the near future. What it does on the dollar index is irrelevant. It's how many dollars to buy an ounce of gold. That number will approach infinity.

    Silver == gold only more so. At least for a while. When that bubble is about to burst, transition to gold and real estate.

  6. stibot says:

    I'd say dollar is not "strengthening" as it is surging above 82, but rather just one of currencies--euro is falling. And look what, DX index basket consists mostly of euros.

  7. Trader says:

    Stibot is right.
    Most currencies other than euro is holding well against the dollar.

    Asian currencies are doing even better. So we can't say dollar is the haven to go.

  8. kean says:

    dollar is about to crash big time! This is certain.

  9. Sebastian says:

    India needs no wheat reserves, as people there can live and do well without eating. Have you heard of Prahlad Jani? He is 82 years old and has lived without food for 70 years. Some Indian people may go hungry, but some have learned to do well without eating. No food crisis for them, no. They only need their yoga.

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