The Hindu Business Line : Guessing game on wheat production prospects

The different versions on the production estimates have, in turn, led to another guessing game on wheat prices during April, when arrivals gather pace.

New Delhi , March 8

A guessing game is on about wheat production in the country. Though the Union Government has pruned its production estimates to 73.1 million tonnes (mt), traders, consumers and growers have different views on the output projections.

On its part, the Union Government on Monday told Parliament that abnormal heat in February was likely to affect wheat crop. Though the weather has turned a bit cool this month, experts feel that the yield could be affected.

The different versions on the production estimates have, in turn, led to another guessing game on wheat prices during April, when arrivals gather pace.

"The Indian Government may have come out with a higher figure. Our enquiries with various players in the market reveal that the production could be 69 mt," said Mr Mark Samson, Vice-President (South Asia) of US Wheat Associates.

Pessimistic views

There are even more pessimistic views that peg the production at around 64 mt. The Centre had initially projected a crop of 75.5 mt.

"Since the monsoon was good, there were farmers who have gone in for early sowing of wheat. Wheat sowing continued till January-end. Our feedback is that those who opted for delayed sowing may be affected," Mr Anirudh Agarwal, a flourmill owner from Agra, told Business Line.

The flourmills, in particular, see the current stock situation as normal, where inventories are usually low during February-March. But they agree that mills in the South have been starved of raw material throughout the season. However, a couple of mills in Uttar Pradesh have contracted wheat from Gujarat around Rs 950 a quintal to meet the short-term demands.

Gujarat has reported a rise in wheat coverage this year, thanks to good soil moisture following favourable monsoon.

"An interesting fact is that wheat production this year could vary depending on the various agro-climatic conditions that prevailed in the respective growing areas. For example, wheat areas in Punjab and Haryana are irrigated and may not have had to face problems to deal with the hot conditions in February," Mr Agarwal said.

One of the States that could be affected is Uttar Pradesh, though farmers around Kanpur area say their crop may not be affected.

On the other hand, production in Madhya Pradesh, where the coverage has dipped by 10 per cent this year, could be around the usual level of one mt, thanks to better yield.

Fall in acreage

According to the Union Agriculture Ministry, the total area under wheat this year is 267.01 lakh hectares against 264.88 lakh hectares last year.

Coverage has declined by 14 per cent in Madhya Pradesh, 50 per cent in Assam and 1.5 per cent Punjab, while in other States, there has been a rise.

An official of a FMCG company said wheat production could be around 71 mt this year, while the mill sector feels it could be around the same level last year. "Since there are so much variations within the States itself, the production could be same as last year or a tad higher," said Mr Agarwal.

Man Financial, which has begun to track the commodities market in the country, has worked out the last five years average yield to arrive at a production figure of 71.6 mt.

Higher price forecast

On the price front, there is a unanimous view that wheat prices this year would be higher than the minimum support price (MSP) of Rs 650 a quintal announced by the Union Government.

"It is going to be a tough job for the Food Corporation of India to procure for the buffer stocks. Farmers will not want to sell at lower prices," an expert said.

Mr Agarwal said prices may not come below Rs 700 a quintal even at the peak arrival season. "There is a huge demand and already, the buyers have queued up. So, it is unlikely the prices will go below Rs 700," he said.

But the FMCG company official said though prices could rule above MSP, they could slip below Rs 700.

"This demand from the industry is not big. Maybe, they will buy 10 lakh tonnes immediately. After that, what will happen?" he asked.

Mr Chirag Shah, Vice-President, Man Financial India Ltd, said compared with last year, wheat for June delivery was Rs 40 a quintal higher than last year and for May delivery it was Rs 15 higher.

Spot prices for wheat now are ruling at Rs 914.75 a quintal in Khanna market in Punjab.

Futures prices on MCX for April are Rs 780 a quintal, while for May and June they are Rs 813 and Rs 821, respectively.

On NCDEX, April futures are Rs 770, May Rs 791 and June Rs 810.

Analysts and experts feel prices could rise above Rs 1,000 a quintal by the end of the year.