Rain in wheat bowls could delay arrivals

Wheat arrivals are likely to be delayed by five days to a week on rain in the growing areas. The production of wheat is likely to be higher this year, even hitting a record, and it could lead to a drop in prices.

“We have had rain a couple of days ago. This could lead to delay in arrivals by at least five days,” said Mr Raj Narayan Gupta, a miller based in New Delhi.

The Agriculture Ministry has projected the output to be 82 million tonnes (mt) against last year's 80.68 mt.

“The crop is very good. We expect production to be over 80 mt,” Mr Gupta said.

“The crop's health is good in almost all States. In Gujarat, production is expected to be 3.5 mt, almost double of last year,” said Mr Pramod Kumar, Executive Director of Bangalore-based Sunil Agro Foods Ltd.

Most industry players are expecting the crop to be 3-4 mt higher since the yield is expected to be higher.

“The weather has been good and favourable to the crop this year,” Mr Kumar said.

The higher production could see a drop in wheat prices from current levels.

Currently, wheat (dara) is quoted at Rs 1,195 a quintal at New Delhi, a benchmark for the grain prices in the country. It has come dropped from Rs 1,250 last week.

Millers in South India were offered wheat at Rs 1,340 a quintal (delivered at Bangalore) against 1,420 a couple of days ago.

“Prices could drop to levels of Rs 1,150 in New Delhi,” said Mr Gupta.

Industry sources say how prices will rule could depend on how procurement is done in Uttar Pradesh. The northern state accounts for around 35 per cent of the country's wheat production.

“The Uttar Pradesh Government has announced setting up of 4,000 procurement centres,” said Mr Kumar.

“The question is how much Uttar Pradesh can procure when there is no storage space,” wonder Mr Gupta.

Procurement in Uttar Pradesh could be a game-changer with regard to wheat prices.

Export decision and prices

Any decision to export could also spur prices. Agriculture Ministry officials say that exports, banned currently, could be allowed sometime in April or May. Trade sources expect a decision after elections to the Tamil Nadu and Bengal State Assemblies get over.

“Even if one or two mt gets exported, it could put tremendous pressure on wheat prices here,” an industry source said, adding that the Centre was also under pressure to announce bonus.

Meanwhile, procurement is on in Madhya Pradesh and a few other States. As on Thursday, wheat procurement by State-owned agencies was 2.5 lakh tonnes against 3.36 lakh tonnes during the same period a year ago.

Wheat procurement is expected to be around 25 mt this year against last year's 22.5 mt.

According to sources, procurement would hinge on Haryana and Punjab production. Both States contribute 21 per cent of the country's wheat production but their share in procurement is far higher. This is because the private trade stays away from markets in these States as they charge higher market levies.

An uncertainty prevails over Madhya Pradesh crop since parts of the State were hit by unseasonal in rain in December. A mixed view prevails on season-ending stocks of wheat. While a section of the trade is pegging stocks around 15 mt, another says it could be around 18 mt.

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