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India cuts wheat import tax to 10% until February 2017

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India cuts wheat import tax to 10% until February 2017

Singapore — India has reduced the import tax on wheat to 10%, from 25%, until end-February 2017, according to an official notice released by the Central Board of Excise and Customs on September 23.

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Market sources attributed the cut in the import tariff to the government's attempt to ensure adequate and affordable food supply ahead of major festive season in October.

Adding to this, slower state procurements and lower domestic buffer stocks could be some of the contributing factors to the cut in the wheat import tax.

Currently, wheat stocks held in the central pool stood at 24.25 million mt, the lowest level seen since 23.26 million mt in 2008, according to data from Food Corporation of India. The normal buffer stock for October 1 is set at 20.52 million mt.

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However, the current stock level is not alarming low, according to a miller in South India.

"The central pool stock is lower than previous years but there is enough wheat to pass Diwali." A congestion at Tuticorin port, with some vessels being redirected to Chennai port, had also slowed down trading momentum for the moment, he added.

On the production front, wheat production for India's 2015-2016 crop year (July-June) is estimated at 93.5 million mt, according to the fourth advance estimates released by the US Department of Agriculture on August 2, lower from its third estimates at 94.04 million mt. On September 22, USDA released first advance estimates for crop year 2016-2017, with wheat estimated at 96.50 million mt, on favorable monsoon rainfall between June and September 2016, and a higher acreage and yield, sources added.

Meanwhile, traders said buying interest for Australian wheat loading in December were heard over the past weeks, but the wide gap between buy and sell notions have slowed down trade activity.

Australian wheat was also priced at a premium of $20-$25/mt to Black Sea origins.

Australian wheat pricing were under pressures over the past few weeks because of expectations of a record harvest and stiffer competition from Black Sea origins given the global surplus in wheat supply.

But unfavorable weather such as flooding in eastern Australia and frost damage concerns last week, alongside a rebound in US wheat futures and Australian foreign exchange propped up selling sentiment.

Nevertheless, prevailing bearish sentiment from key Southeast Asian buyers capped potential rise in prices, with the Australian Premium Wheat assessed lower by $1/mt day on day at $199.50/mt FOB Western Australia on September 23, S&P Global Platts data showed.

--Alexis Gan, alexis.gan@spglobal.com

--Edited by Irene Tang, irene.tang@spglobal.com