By Pratik Parija and Subramaniam Sharma — April 22, 2008 10:07 EDT

April 22 (Bloomberg) — India, the worlds second-biggest grower of rice and wheat, may harvest record crops after adequate rainfall and sunshine boosted yields, helping the government tame inflation thats near a three-year high.

Food grain production in the year to June will rise 4.6 percent to 227.3 million metric tons, Agriculture Secretary P.K. Mishra told a news conference in New Delhi today. Wheat output may climb to 76.8 million tons, more than the 74.8 million tons estimated in February and up from 75.8 million tons last year.

A bigger harvest of wheat and rice is crucial to efforts by Prime Minister Manmohan Singh s government to cool inflation before general elections within a year. The prospect of lower prices may deter the government from extending a ban on wheat futures to other commodities as early as this week.

«This is certainly good for the government, which is struggling to control inflation, said Kishore Narne. head of research at Anand Rathi Commodities Ltd. «Record production will also ease pressure on the government to ban futures trading in some commodities.

India may consider barring trading in some commodities by the end of this week, Agriculture Minister Sharad Pawar told parliament on April 16, after lawmakers said trading had contributed to rising prices of staples such as edible oils. Higher food prices helped stoke inflation to 7.14 percent in the week ended April 5, more than two percentage points above the central banks target.

Inflation Measures

The government last year halted trading in wheat and lentils, and has since banned exports of edible oils and rice to curb inflation in Asias third-biggest economy. Indias central bank ordered banks on April 17 to set aside more money to cool lending, adding to government efforts to rein in inflation that has more than doubled in the past four months amid soaring commodity and food prices.

Rice output in the year to June may rise to a record 95.7 million tons, from 94.1 million tons estimated on Feb. 7, Mishra said. Thats 2.5 percent more than the 93.6 million tons produced a year earlier.

The total rainfall and distribution was congenial last year, Mishra said. Temperatures in winter were favorable for various crops, particularly wheat, he said.

Countries worldwide are seeking to boost rice yields to raise output, increase food security and bring down prices. Almost half the worlds population depends on the grain as a staple food, with China and India being the top two producers and consumers.

Food Security

Rough rice futures prices have more than doubled on the Chicago Board of Trade in the past year, threatening food security across Asia. Leading exporters of the cereal such as China, Vietnam and Egypt are curbing supplies. India has banned exports of rice and set a minimum export price of $1,200 per ton for shipment of aromatic basmati rice to boost local supplies.

Rice futures in Chicago rose as much as 2.1 percent to $24.185 per 100 pounds in after-hours electronic trading and traded at $23.95 as of midday in London. It touched a record $24.67 on April 18.

Wheat and corn have also touched records this year, fanning inflation and sparking warnings from the UN and International Monetary Fund that the jump may trigger starvation and unrest.

Wheat for July delivery was down 1.5 cents, or 0.2 percent, at $8.58 a bushel, after losing 2.9 percent yesterday. Wheat reached a record $13.495 Feb. 27 and is still up 74 percent from a year earlier.

Indias corn output may reach a record 18.54 million tons, 23 percent more than last year, the farm ministrys Mishra said.

Output of oilseeds such as soybean and peanut may rise to 28.21 million tons, up 16 percent, from 24.3 million tons a year earlier, he said.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.