The demand destruction for wheat products caused by prevailing Covid second wave coupled with Food Corporation of India’s plan to offer the cereal at one price pan India under open market sale scheme-domestic (OMSS-D) and the extension of free foodgrain supply to 80 crore beneficiaries till November are seen weighing on the wheat market for the most part of marketing season ahead.

On Monday, Prime Minister Narendra Modi announced the extension of Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) extended till Diwali.

Wheat prices, which are hovering below the minimum support price (MSP) of ₹1,975 per quintal across many markets including Delhi will continue to remain under pressure going ahead, trade sources said. Prices in Delhi were around ₹1,850 per quintal on Monday for the UP wheat, while the cereal from Madhya Pradesh and Rajasthan was ranged between ₹1,860-1,870. The modal prices for wheat across many of the markets in UP stood at ₹1,975 on Monday.

Enhanced procurment

The Government, which has already purchased a record 41.64 million tonnes of wheat in the 2021-22 rabi marketing season, till June 6, is still procuring the cereal at MSP in states such as Uttar Pradesh, Bihar, Rajasthan and Jammu & Kashmir.

The procurement exercise has, so far, benefited 46 lakh farmers. The Government has recently enhanced the procurement target to 43.3 million tonnes for the current season.

FCI has recently started offloading the lustre loss wheat from the previous crop years to consuming states under the OMSS scheme. For the lustre loss wheat or ORS wheat of the 2019-20 crop, the reserve price has been fixed at ₹1,800 per quintal, while for the 2020-21 crop it has been fixed at ₹2,000 per quintal.

The reserve price for FAQ wheat for all years except 2021-22 has been fixed at ₹2,100.

Fear of Northern millers

Flour mills from South have shown interest in the FCI’s proposal for lustre lost wheat, which has irked the millers in the North, mainly from UP. The Northern millers fear a loss of their market share for wheat products such as atta, maida and sooji in the consuming regions of South and Eastern India as millers from these regions are getting access to cheaper wheat. “We may find it difficult to compete with the Southern mills now,” a miller in Agra region said.

Also, the early announcement of OMSS price by FCI on April 30 this year has resulted in slower mandi purchases by Southern millers. The mills in South, which traditionally used to stock up wheat for the season ahead are seen going slow and have not stocked much this year.

Flour millers across the country are already reeling under the impact of the localised lockdowns in various states, which has hit the out-of-home consumption mainly from segments such as hotels and restaurants among others. Curbs on large events and marriages coupled with closures of schools, colleges and hostels has also resulted in lower off-take for wheat products.

Trade sources said the extension of PMGKAY will keep wheat prices under check and will impact those who have stocked up wheat during the season. “The impact of the scheme on the trade will come a little later,” a miller said.

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