The Hindu Business Line : Wheat prices may gain after arrivals get over

Moving up
The higher procurement of wheat by the Centre could result in its prices gaining from sometime in October.
A marginal rise is likely from next month itself.

M.R. Subramani

Chennai, May 5 Wheat prices may tend to gain once the current year’s arrivals get over. However, views on the time when the prices may start going up are divided.

Currently, arrivals are flooding all over the market and, according to trade and industry sources, no shortage or problem is being witnessed in wheat compared with what happened during the corresponding period last year.

No shortage

While the Centre is busy mopping up the grain for buffer stocks in States such as Punjab and Haryana besides to some extent in Madhya Pradesh, Rajasthan and Bihar, the private trade, particularly millers, is to get adequate supply from Maharashtra and Madhya Pradesh.

“We are not witnessing any shortage in wheat. We are able to get wheat by road from Maharashtra and Madhya Pradesh to our mill in Karnataka at Rs 1,280-90 a quintal,” said Mr Pramod Kumar, President of the Karnataka Roller Flour Mills Federation.

The ample supply of the foodgrain, especially to mills in the South, is despite the Railways’ decision on not to allocate wagons to the private trade for moving wheat.

“We are getting wheat by road transport but it is Rs 50 a quintal higher than the price at what Karnataka mills are getting,” said Mr K.S. Kamalakannan, Convenor of Flour Mills Federation of India and President of Tamil Nadu Roller Flour Mills Association.

Prices steady

In the New Delhi market, considered a benchmark for national prices, wheat (dara) was quoted at Rs 1,070-1,120 a quintal. Prices have been ruling at this level for the last few days.

On the other hand, procurement of wheat by Central agencies for buffer stocks till Sunday has been estimated at 166 lakh tonnes (lt). Punjab alone has contributed 94 lt, while 48 lt has come from Haryana. According to the Government sources, the Centre is confident of mopping up 180 lt for buffer stocks against a target of 150 lt.

HIGHEr support price

The Centre has been able to muster wheat more than its target mainly since the minimum support price for wheat has been hiked to Rs 1,000 a quintal this year, while higher cess and taxes in Punjab and Haryana ensure that the private trade is out of contention there in buying the grain.

“What we are witnessing is that no one is trying to hold stocks like last year. Multi-national agencies, which procured over 20 lakh tonnes last year, are also not in the markets to buy wheat. Having burnt their fingers last year by holding on stocks, farmers and traders are equally eager to offload whatever they have,” Mr Pramod Kumar said.

Since the Centre is buying available wheat in Punjab, Haryana, Rajasthan, Madhya Pradesh and Uttar Pradesh, where the Food Corporation is offering a 2.5 per cent commission to arthiyas or commission agents, the trade and industry perceive a tight supply situation during the later part of the year.

Buying from Bihar

“We hear that the Centre has been procuring stocks from Bihar also,” industry sources said.

“But the higher procurement of wheat by the Centre could result in its prices gaining from sometime in October,” said Mr Raj Sud, a trader in Khanna, Punjab.

Government sources, too, are of the view that the market could witness some increase in October.

“We expect prices to gain once the arrivals get over. There could be marginal rise, probably from next month itself,” Mr Kamalakannan said.

Under pressure

Mr Sud said if the Centre procures more, availability for flour mills, especially towards the end of the year, would be less. “With import being a remote possibility due to higher global prices, the domestic market could face pressure,” he said.

But according to industry sources, the Centre is keen to keep inflation under control and it would not want to see any rise in wheat prices.

“There is already a talk of the Centre resuming Open Market Sale Scheme. If that happens, it could keep the prices under leash,” the sources said.

Arrivals are heavy this year in view of wheat production being estimated at a record 76.78 million tonnes (mt) against 75.81 mt last year.