India to sell more wheat to Nepal; may ship rice

By Mayank Bhardwaj

NEW DELHI, Feb 10 (Reuters) - India will sell an additional 200,000 tonnes of wheat to Nepal and may supply limited quantities of rice to Bangladesh, official sources said, indicating the government's confidence about food supplies and prices in the coming months.

India's food prices, rising since the worst monsoon in 37 years in 2009, were up over 17 percent in January, sparking protests, but Prime Minister Manmohan Singh last Saturday said that crop outlook had brightened and food prices would be controlled.

India, the world's second-biggest producer of wheat, banned overseas sales of the grain in February 2007, but lifted the restriction last July for a few days, but no export deals were struck. Exports of common grades of rice were banned in 2008.

A state-run firm would soon be allowed to export an additional 200,000 tonnes of the grain to Nepal, government sources told Reuters on Wednesday.

"Exports of 200,000 tonnes of wheat from government account to Nepal will take place soon," an official, who did not wish to be named, said.

The government allowed exports of 50,000 tonnes to neighbouring Nepal late Tuesday.

India is expecting a record output of 80-82 million tonnes in the two-month harvest that begins in March, government officials and analysts say, up from 80.6 million tonnes a year ago.

The country produces only one harvest in a year. The crop is planted in October and harvested from March.

"With harvests around the corner, the government needs to make room for the new crop. Government's godowns are chock-a-block," said Vinod Kapoor, former president and a member of the Wheat Products Promotion Council.

On Jan. 1, wheat stocks at government warehouses were at 23.0 million tonnes, nearly three times the targeted 8.2 million tonnes.

Overflowing grain bins encouraged Farm Minister Sharad Pawar to forecast wheat stocks at 14.7 million tonnes on Apr. 1, when the new marketing year begins, against a target of 4 million tonnes.

As the government grapples with storage concerns, traders say the country would allow some more government-to-government deals.

Kapoor said current global prices were too low for large wheat exports by private firms.

Benchmark wheat prices WH9 on the Chicago Board of Trade have fallen nearly 11 percent in 2010. On Tuesday, prices settled 64.3 percent lower at $4.82 a bushel from their peak of $13.495 in early 2008.