The Hindu Business Line : Wheat prices crash on poor offtake by mills

Chennai, Sept. 16 Wheat prices in primary markets of Uttar Pradesh, Punjab and Haryana have crashed on poor offtake by rolling flour mills and talks of the Centre selling wheat at Rs 1,000 a quintal under the open market sale scheme (OMSS).

Benefits unlikely

The fall is unlikely to translate into immediate benefits for consumers as uncertainty created by a fall in prices of almost all commodities is keeping buyers away.

“Prices of wheat (dara) that is used by the flour mills have dropped to Rs 960-980 a quintal in Asia’s largest grain market at Khanna because mills are not buying. One main reason is there is talk of the Centre selling wheat under OMSS at procurement price of Rs 1,000 a quintal,” said Mr Raj Sud, a trader from Khanna in Punjab.

“Mills in the South are not buying from Punjab because prices in Uttar Pradesh are cheaper. Even then, it is a ‘wait and watch’ attitude as we are waiting for the Centre to announce the price at which wheat will be sold under OMSS,” said Mr Pramod Kumar, President of Karnataka Roller Flour Mills Association.

In Uttar Pradesh, wheat is available at Rs 920-930 a quintal, while in New Delhi, seen as a benchmark by the trade, prices are hovering at Rs 1,060 a quintal.

Fingers burnt

Trade sources said in some place, last year’s wheat and infested wheat were being offered at discount.

“Mills are not buying because they all bought at the start of the season and have ended up burning their fingers,” said Mr Vinod Kapoor, Chairman of Wheat Products Promotion Society.

While prices of wheat at the mills gates in Haryana and Punjab were Rs 1,100 a quintal, they had footed Rs 1,180 a quintal to buy wheat at the beginning of the season. “All the mills stocked wheat at the beginning of the season. Besides higher cost, they have to additionally foot storage and interest charges,” he said.

“Not much (of the) stocks are reaching markets in Punjab and Haryana. Farmers opt to take it to Delhi to get better prices,” Mr Kapoor said.

“Everyone one is scared to think of what will happen as prices are falling. Things could be a little clear(er) once the OMSS is announced,” Mr Kumar said, adding that currently flour mills in the South have to foot Rs 1,220-1,250 a quintal to get wheat at their units, against the earlier Rs 1,285-1,290.

Mr Sud said prices could increase once the OMSS was announced, but trade sources said the talk of wheat being offered at Rs 1,000 under the scheme was mainly due to the Centre having offered wheat to the States at that rate, foregoing charges spent on procurement.

Mr Kapoor said mills in Haryana and Punjab were affected by poor demand because they were not able to send flour out of these two States.

Good production

“Other wheat producing States such as Bihar, Uttar Pradesh, Gujarat and Madhya Pradesh have all witnessed good production. They are catering to the needs of neigbouring States such as West Bengal or Maharashtra. The only hope for Haryana and Punjab mills is the South, but higher transport costs are a hurdle,” he said.

This year, wheat production has been estimated at a record 76.78 million tonnes. On the other hand, the Centre has mopped up 22.5 million tonnes of wheat for buffer stocks, offering growers a minimum support price of Rs 1,000 a quintal. The higher procurement has now given the Centre an option to offload 1 million tonnes in the open market.

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