Indian wheat prices rebound from fall after export ban

Indian wheat prices have begun to rebound from the fall witnessed soon after the Government banned exports. The Food Corporation of India (FCI) has, on the other hand, managed to procure over one lakh tonnes of wheat only after the curbs were imposed.

The weighted average modal price of wheat has, at Agricultural Produce Marketing Committee (APMC) yards, increased to ₹2,080 a quintal on Thursday (May 19) from ₹2,066 on May 15, a day after the Centre banned shipments of the grain. Wheat prices in private trade have dropped by as much as ₹400 a quintal at Gondal in Gujarat to as low as ₹5 at Hardoi in Uttar Pradesh. 

Wheat is also offered by some private traders at ₹2,175 a quintal for cash payment in seven days with the consignment being delivered in five days. 

Ruling above MSP 

Among the States, prices have tended to increase in Bihar, Chhattisgarh, Gujarat and Uttar Pradesh. Rates in Haryana, Madhya Pradesh (where most markets were closed due to traders’ strike), Maharashtra and Rajasthan have swung up and down while dropping in Punjab. Prices in all the States are, however, ruling above the minimum support price of ₹2,015 a quintal fixed for this year. 

On the other hand, the FCI has procured 0.16 million tonnes (mt) of wheat since the ban was imposed with total procurement rising to 18.12 mt as of May 18, down by nearly 52 per cent year-on-year.  During the same time last year, the procurement was 37.66 mt.  Arrivals at APMC yards have tended to fluctuate touching as high as 1.06 lakh tonnes on May 17, before dropping to 69,000 tonnes on May 18 and 80,000 tonnes on May 19 (Thursday).

“Prices are tending to rise and FCI procurement is also not picking up to expected levels. People are holding the produce,” said a South India-based miller without wishing to identify.

Stocks declaration on cards?

“The Centre is carrying out surgery when first aid is required and vice-versa. This is the reason for the wheat situation,” said Rajesh Paharia Jain, a Delhi-based exporter.

“Prices are tending to head lower. Any rise may be a small correction,” a South India-based trader. 

With stocks not coming out in the market as expected despite the ban, traders and industry officials say the Centre could now ask all stakeholders to declare the stocks with them. “Announcing stock limit could be a problem since wheat arrivals get over in two months and users have to stock it until next March before new arrivals begin,” a New Delhi-based trader said. 

‘Target hoarders’

A Delhi-based analyst said unless the Government targeted those who are suspected of hoarding, prices will not drop to desired levels. “In western Uttar Pradesh, Punjab or Haryana, it has to target those persons who had stocked basmati rice on earlier occasions. Similarly, in Madhya Pradesh it has to target those who had stocked pulses 3-4 years ago,” he said. 

The Centre should at least send strong signals to the “known culprits” so that wheat is not hoarded. The government can also act by asking banks to not extend funds to such people, he said. 

“The Centre can think of various ways. It can revive futures trading in wheat and force FCI or NAFED to go bearish on, say, December futures,” the analyst said. 

Export tax mooted

The South India-based exporter said suggestions were given to the Centre to impose export tax on wheat but it did not heed. “Indian wheat was sold at a discount of over $60 a tonne in the global market. Had we imposed a 20 per cent export tax, we could have slowed exports,” he said. 

But the Delhi-based trader said it would not have made much difference since global prices tended to react to any development in India. 

In the global market, wheat prices have eased by over 1.5 per cent over the last two sessions to $12.11 a bushel ($444.92 a tonne) from the highs of $12.8 seen earlier this week following the export ban. The fall follows reports that the UN plans a revamp in wheat exports affected by the Ukraine war. 

According to the International Grains Council, Argentine wheat dropped on May 18 to $481 a tonne, while European to $466. US Hard Red Winter wheat declined to $560 and Soft Red Winter wheat to $487.

Prices double since conflict began

Wheat prices have doubled since the Russia-Ukraine conflict as both the nations account for 30 per cent of the global trade. With supplies from the Black Sea region affected due to the war, demand for Indian wheat increased, particularly from South, South-East and West Asia, besides Africa. 

The demand resulted in India shipping out a record of over 7.75 mt of wheat last fiscal, while exports in April were over 1.75 mt. This month, they are likely to top 1.5 mt. 

Also, exporters had signed 4.1 mt of wheat for shipments abroad until July. While imposing the ban, the Centre has assured the exports will be allowed if exporters have an irrevocable letter of credit. 

India’s problems on the wheat front cropped up when the crop was affected by the heat wave that swept across the country in March-April. This affected the yield and production is now expected to be below 100 mt against the initial estimates of a record 111.32 mt. 

Besides, FCI’s procurement dropping sharply raised concerns over the Centre meeting domestic demand, including distribution of the grain in the public distribution system. This and concerns over global wheat production next year forced the Government to ban exports. 

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