The Hindu Business Line : Concern over spiralling wheat prices

WHEAT prices in the market have begun to rise alarmingly even before the season for harvest, arrival and procurement has come to an end. In the last 10 days, the price spike has been so sharp that serious apprehensions about the future course of the market have surfaced.

Huge inflow of speculative funds for inventory build-up, large-scale purchase by private trade and lack of reliable information on crop size seem to be driving the market up even at this early stage of the season.

Wheat prices in the Delhi region touched Rs 800 a quintal today with some private buyers contracting at the price. Delhi market is serviced by produce largely from Uttar Pradesh where the wheat crop is smaller than anticipated because of weather aberrations.

However, even in the Punjab marketing yards a firm trend is beginning to be noticed. While the procurement price announced by the Government is Rs 640 a quintal, private buyers are paying a premium. After payment of local taxes and duties (as much as 11.5 per cent), the price works out to Rs 720 a quintal. In the last few days, a firm trend has prevailed at major markets.

In the futures exchange - the National Commodities and Derivatives Exchange — spot prices are around Rs 730 a quintal (polled prices, tax-paid), while July futures are quoted higher at Rs 785 a quintal. These levels are perceived as unnatural, going by past trends, some traders commented.

A senior official of the Food Corporation of India (FCI) confirmed to Business Line that wheat procurement during the season has already touched 14.5 mt. He also said that the agency has been able to procure wheat from Punjab at the rate of Rs 640 a quintal. However, at the current pace of price rise and looking at the progress in procurement so far, FCI is unlikely to meet its procurement target of 18 mt this season.

It is unclear if the Government is concerned about what's going on in the wheat market, especially on the price front. Repeated attempts by this correspondent to speak with the Joint Secretary in the Ministry of Food, Mr Sanjay Kaul, were stonewalled.

According to the Ministry of Agriculture, wheat production this season is 72 mt marginally higher than last year. Stock of wheat with FCI at the beginning of the season on April 1 was approximately 4.5 mt as against the minimum stock norm of 4 mt. The current demand-supply fundamentals do not reflect a grave situation in terms of availability and therefore, do not justify a sharp price spike at this time of the season.

Clearly, massive speculation in the market is driving prices up; but growers are not the beneficiaries. The benefit of rising prices does not flow to wheat growers as a very large part of arrivals had already been completed a fortnight ago - early this month - and the produce had already been marketed.

There is widespread suspicion that speculators are jacking prices up. Also, there may be certain interests working to crack the Indian wheat market open for imports. The situation warrants that the Ministry of Food and Consumer Affairs steps in to rein in runaway wheat prices.

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