Wheat prices have increased by over five per cent in the last couple of weeks as traders and millers complain of shortage in supplies.

“There seems to be no wheat at all in the market and we are starved of supplies. We have to make do with the grain supplied by the Food Corporation of India (FCI) through its open market sale scheme,” said Pramod Kumar, Director of Bangalore-based Sunil Agro Mills.

Prices of wheat used by flour mills at the Etawah Agricultural Produce Marketing Committee yard in Uttar Pradesh increased to Rs 1,480 a quintal early this week from Rs 1,400 during the middle of September.

In Kanpur, prices for the same variety have gone up to Rs 1,610 from Rs 1,545 at the start of the month.

Wheat futures maturing in December have risen to Rs 1,639 from Rs 1,580 during the same period.

“Wheat prices in the open market are rising every day and we are surprised,” said Raj Narayan Gupta, a miller in Uttar Pradesh.

Not enough quantity

Though millers can buy wheat from FCI’s open market sale, they complain that they are not able to get the quantity required.

“We are not getting the required quantity of wheat either from the FCI or open market. The quality of the grain offered by the Food Corporation is also not up-to-mark,” said P.K. Ahmed, Kerala Roller Flour Mills Federation Chairman.

Currently, FCI offers wheat to bulk users under the open market sale scheme at Rs 1,820 a quintal in Karnataka and Kerala at the railway yard. If millers get wheat from Uttar Pradesh to their factory gates in these States, it costs them around Rs 1,950.

Food Ministry officials refute millers’ claim on the availability and quality of wheat.

“There is absolutely no shortage. Enough wheat is being released through FCI under the open market sale scheme,” said a senior official. On September 24, the Cabinet approved sale of 85 lakh tonnes of wheat to bulk buyers such as flour millers under the open market scheme by easing norms. Earlier, bulk traders were allowed to buy FCI wheat only from Punjab and Haryana at the reserve price of Rs 1,500 a quintal through tenders.

Going by the recent decision, millers can buy wheat from FCI depots in their own States by paying the reserve price plus the charges for moving the grain from Ludhiana.

“Purchase of wheat under the open market sale has rather been poor compared with the quantity allotted. Of the 57.13 lakh tonnes allotted, the offtake has been only 1.9 lakh tonnes as on October 14,” FCI said in a statement.

“Quality is an issue for the poor procurement,” said a miller on condition of anonymity.

Millers wonder if the Agriculture Ministry has projected the wheat crop correctly this year. In its revised estimate, the Ministry has pegged the crop at 92.46 million tonnes against a record 94.88 mt last year.

“We don’t think that India has produced so much wheat this year. Let’s look this way. Procurement by the FCI for the Central pool dropped to 25 mt this year from 38 mt last year. If the Agriculture Ministry’s estimate is correct, then where has the over 10 mt of wheat gone?” asked Sunil Agro’s Kumar.

But Agriculture Ministry officials say their projection is based on inputs from various agencies and any revision will be made during the final estimate later.

What is worrying millers currently is the Centre’s effort to export wheat at a price which they consider is subsidising overseas buyers.

In August, the Centre had cleared export of two mt of wheat from FCI stocks at $300 a tonne. But with no takers for the grain at that price, the FCI got the Food Ministry to lower the floor price for export to $260 (Rs 1,600 a quintal).

“The Government should not have lowered the floor price for export because it would amount to subsidising buyers abroad. Recently, one of the multi-national firms exported 30,000 tonnes of wheat from here at $279 (Rs 1,713 a quintal),” said Kumar.

Millers say that the actual realisation from $260 will only be $240 (Rs 14,750), taking transportation costs into consideration.

“Mills in North India are getting wheat from the FCI at Rs 1,500 a quintal,” said UP mills’ Gupta.

The Government is keen to export since the FCI has over 36 mt of wheat in its warehouses against the mandatory 11 mt as on October 1.

“The Centre should offer better wheat at a more competitive price to us,” said Kerala Flour Mills’ Ahmed.

Millers point is that Indian wheat that is exported is used primarily for feed purpose abroad.

Recently, the Philippines signed a contract to import 45,000 of feed wheat, comparable with Indian quality, from the Black Sea region at $295 (Rs 1,810 a quintal) cost and freight. On Tuesday, Russia offered wheat from the region at $280 (Rs 17,200).

Wheat prices on the Chicago Board of Trade, a benchmark for the grain market, increased to $7.03 a bushel (Rs 1,590 a quintal) last week on concerns over dry weather in Argentina and delay in Ukraine and Russian planting owing to rain.

However, with rains forecast throughout this week in Argentina and wheat sowing picking up in the erstwhile Soviet Union states, prices have dropped to $6.83 a bushel (Rs 1,541 a quintal) on Wednesday.



(This article was published on October 30, 2013)
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