The Hindu Business Line : High wheat prices result in offtake being hit

Consequences
The tight supply situation is seen continuing this year too, though prospects for a recovery are bright.
The dip has been more pronounced in labour-intensive areas.

Chennai , Jan. 9

High wheat prices since the beginning of last year have resulted in its consumption declining across the country, particularly in labour-intensive areas. Wheat prices have been ruling over Rs 10,000 a tonne since July last as production last year declined below expectations and buffer stocks with the Centre were low.

Currently, wheat (dara) in New Delhi is quoted at Rs 1,087-1,090 a quintal. In the futures market, wheat for near-month contract was quoted at Rs 1,061 a quintal on NCDEX and Rs 1,087 on MCX. March contract wheat is quoted at Rs 935 and April at Rs 887 on NCDEX. Spot and futures are higher than the minimum support price of Rs 750 a quintal fixed by the Centre for wheat this year.

"There is definitely a decline in offtake of wheat products. Our buyers are resisting purchase of products such as maida and we are caught in a piquant situation," said a miller from North India. The story is same in South India also, though millers in Kerala said they had not witnessed any such trend.

Definite Fall

"We are facing resistance from confectioners, biscuit and bread makers. There is a definite fall in wheat products consumption" said Mr Pramod Kumar of Sunil Agro Foods in Karnataka.

Sunil Agro Foods, which also has sister concerns such as Belgaum Roller Flour Mills and Brindavan Roller Flour Mills, witnessed around 20 per cent fall in offtake of wheat products. Mr M.V. Balasubramanian of the Salem-based Narasu's Roller Flour Mills said mills had witnessed poor offtake of products during festival season last month, particularly Christmas.

"We usually witnessed good offtake during the Christmas period. This time, here has been a fall," he said. However, millers and user industries are unable to give exact figures with regard to the decline in consumption. According an NCDEX official, at least 35 million tonnes of wheat comes into the market after farmers retain a portion of it for their own consumption and sowing.

"There is not only decline in wheat consumption but also shift to other cereals such as rice and bajra. The weaker section, in particular, have shifted from wheat," said Mr Vinod Kapoor, Chariman, Wheat Products Promotion Society. "We have seen more serious shift in areas which are labour intensive. These people have been unable to foot Rs 13-14 a kg for atta. In some cases, they have gone in for cheaper broken rice," he said.

Private Purchase

The tight supply situation is seen continuing this year too, though prospects for a recovery in the crop are bright. While the Agriculture Ministry is hoping for a crop of around 74 million tonnes, the trade is putting it at 72.8 million tonnes. Also, the trade expects private purchase of wheat from the open market to double this year, given last year's experience. "It is bound to happen as the user industries would be keen to ensure they have adequate stocks," said Mr Pramod Kumar.

"The Centre can fix a limit for procurement of wheat by big and multi-national firms. It also can keep the options for wheat import by private trade open till May to ensure adequate quantity is mopped up for buffer stocks," he said.

Option

According to trade sources, such an option can keep the market sentiment a bit weak. However, prices are seen ruling above the minimum support price.

Last year's production has been estimated at 68.03 million tonnes against 72 million tonnes the previous year.

The lower production led to the Centre importing wheat duty-free for buffer stocks. It also allowed private trade to bring in wheat from abroad. While the Centre contracted 55 lakh tonnes from various sources, the private trade is estimated to have brought in about 20 lakh tonnes.