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Wheat prices in the Indian domestic market have gained 2.5 per cent in the past week, leaving procurement of the grain for the Central pool struggling to top the 27 million tonnes (mt) mark. This is despite the Agriculture Ministry raising its production estimate on Thursday by 0.5 per cent to 112.74 mt.
According to officials, wheat procurement has lost momentum and as of May 24, the Food Corporation of India (FCI) has procured 26.17 mt with Punjab being the largest contributor. Punjab farmers sold 12.57 mt of wheat to FCI and the procurement ended on Thursday. Madhya Pradesh with 9.25 mt and Haryana with 6.31 mt are the other major contributors to the Central pool.
At the same time, the weighted average price of wheat has increased to ₹2,272 a quintal from ₹2,216 a week ago against the minimum support price (MSP) of ₹2,215.
Market unimpressed
The Agriculture Ministry’s higher projection of wheat production has not impressed the market, with many traders saying that it is “out of sync” with ground realities. “If the production is over 112 mt, then why is the government unable to procure its targeted 34.51 mt of wheat?” wondered a Delhi-based trader. “We will be happy if the production turns out to be 103-104 mt,” said a South Indian miller.
A trader said wheat procurement may not exceed 26.3 mt this year going by current trends, where farmers are either holding back their produce or selling it to private traders above MSP.
Govt in a spot of bother
The Roller Flour Mills Federation of India (RFMFI), which carried out a crop survey, has estimated the crop at 104.24 mt. The US Department of Agriculture has estimated the Indian crop at 104 mt. Last year’s production was pegged at 107.74 mt, though the trade believes it is lower at around 100 mt. “Wheat prices over the past month have increased by ₹250 a quintal,” said Pramod Kumar, President, RFMFI.
On Thursday, representatives of the flour industry led by Kumar met the Food Secretary Sanjeev Chopra seeking the resumption of the open market sale scheme (OMSS) for wheat.
Traders said the Centre is in a tight spot with the wheat crop failing again this year due to inclement weather. Last year, the crop was hit by a heatwave that swept across the growing regions during March-April. This year, excess heat in February followed by a wet and cold March has affected the crop.
Stocks at 15-year low
Trade sources said the Centre might have to resume OMSS to control wheat prices the way it did during January-March this year. At the beginning of the year, wheat prices rose to over ₹3,300 a quintal forcing the government to release 5 mt of wheat under OMSS.
About 3.5 mt of wheat were bought by bulk and other users till March 15 before OMSS was discontinued. “Last year, mills sought OMSS during October-November. This year, they are seeking now. The demand-supply situation seems precariously balanced,” the South Indian miller said.
According to the FCI, wheat stocks at 29..03 mt as of May 1 was the lowest since 2008, while foodgrain stocks at 55.53 mt are at a six-year low. In addition, the FCI has stocks of 22.69 mt of unmilled paddy, which can yield 15.88 mt of rice.
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