Higher than normal temperatures in India throughout February have led to concerns that this may impact the nationwide wheat crop. There are predictions of above normal temperatures in March as well. The country has experienced three years of poor wheat crop due to adverse weather. Although the prediction is that of a bumper crop in 2025, the India Meteorological Department’s prediction of above-average temperatures in March across most regions following a warmer than usual February could spoil the party.

Reuters in a recent report said that higher temperatures could negatively impact the yields for the fourth straight year. This could cut overall wheat output and force the government to lower or remove the 40% import tax to facilitate overseas shipments by private traders to tide over shortages, according to the news agency.

The year 2022 was exceptionally bad for the Indian wheat crop, when wheat growing regions of north India also experienced higher than usual temperatures. This in turn led to lower government procurement which saw India resorting to a wheat export ban in 2022 to check rising prices. 

As a result, Indian wheat prices have remained elevated in recent years. Due to below par crop in the last three years, prices have remained high and reached a record in February due to dwindling supplies.

However, Moneycontrol in a report has said that some analysts believe that despite the warmer winter weather in January and February, the winter crop may not be severely affected as snowfall in Jammu and Kashmir has cooled down the temperature on parts of wheat growing areas in north India. The fear that the crop may turn out to be below normal still persists, however, Moneycontrol added.

If the wheat crop disappoints for the fourth straight year, it would pose a substantial headache for the government which is already battling high food inflation. In case of a bad crop, the government will be forced to lower or remove the 40% import tax to facilitate smoother imports of the grain. 

Industry bodies have already started clamouring for a duty cut. Roller Flour Millers’ Federation of India has demanded the duty on wheat imports be reduced from 40% to 5-10%, stating that it will help flour millers in Southern India and increase wheat supplies around the country, according to a report by Indian Express.

India last hiked the duty on wheat imports from 30% to 40% in April 2019, and it has remained at that level since then.

Record rice inventories to bring some relief

Although the wheat crop in India has been disappointing in the last few years, rice production has been robust. India's rice stocks hit a record high at the start of January, reaching eight times the government's target, Reuters said in a separate report.

Indian farmers harvested a record summer-season rice crop of 120mn tonnes this current crop year, accounting for 85% of India’s total rice production. This bumper yield followed extensive monsoon rains in June, July and August of 2024, which encouraged expanded planting.

Rice reserves in government warehouses, including unmilled paddy, stood at 60.9mn tonnes as of January 1, compared to the government's target of 7.6mn tonnes, Reuters reported citing data compiled by the Food Corporation of India.

In knock-on effect, India has been easing restrictions on exports of rice. 

In September 2024, the government scrapped export duties and minimum export prices on non-basmati and basmati rice exports imposed in 2023. As the situation began improving, the government gradually started lifting restrictions on exports, variety by variety. 

The ban was removed on all varieties except broken rice. Last week, it finally decided to scrap the ban on 100% broken rice as well. This has come as great news for African countries where this variety is popular due to its low price.

The nation’s Financial Express reported that the move to lift restrictions on broken rice exports could help reduce high government rice inventories in India and help poorer African countries to procure the grain at lower prices. Indian broken rice is especially popular in West Africa as it is inexpensive. The move will also support Asian animal feed and ethanol producers.

In FY24, India exported broken rice worth $194mn. The value of exports of broken rice was $983mn in FY23 and $1.13bn in FY22, according to the same Financial Express.

In FY24, India's total rice exports were valued at $10.41bn, down 6.5% year-on-year, as shipments were impacted because of the ban.

Exporters say that rice exports throughout FY25 may see an increase of 15% to cross a record level of $12bn because of robust global demand, Financial Express reported.