Over the last 18 months, wheat has been a topic of animated discussion in the global agribusiness circles following the outbreak of the Russia-Ukraine war. As the world’s second largest producer of wheat, in India, too, wheat has been a topic of debate.

Since the harvest last year (April/May 2022), the supply-demand fundamentals have tightened. Procurement by Food Corporation of India (FCI) has fallen well short of the target for two years in a row, 2022 and 2023. Tight S-D balance has driven open market prices well above the specified procurement price.

Concerned over the wheat situation, the government has made a series of interventions including a ban on export in May 2022. Stock limits have been imposed and then tightened. Wheat allocation in the welfare programmes was reduced, partially replaced by rice.

For a country long used to massive public stocks and unmanageable surplus, this development has shocked stakeholders, including the policymakers. Yet, for independent observers rooted to the ground, this was something waiting to happen. It reflects the failure of the policymakers to read advance signals sent by the market.

Three aspects — production, acreage and yield — bear scrutiny. On production, it is well recognised that Indian wheat has been at the limit of heat tolerance for at least ten years now. Climate change has started to take a toll. Tropical nations are more vulnerable to the adverse effects of global warming. Do we recognise this reality?

The heat waves experienced in 2022 and 2023 were a stark reminder. It will be wishful thinking to assume that weather in the coming years will be normal. Extraordinary research efforts and investments are necessary to evolve heat-resistant, heat-tolerant wheat varieties. It is unclear if anything is happening in this direction.

Saturation point

The next aspect is acreage. This author believes, at 33-34 million hectares, wheat acreage may be nearing a saturation point. We cannot expect any dramatic expansion in wheat planted area in future years. If anything, a part of the wheat acreage in high input, grain mono-cropping regions should shift to other crops such as oilseeds and pulses for crop rotation to reduce adverse environmental impact. Of late, Madhya Pradesh has emerged as a high producer of wheat. Which other States are ready to emulate Madhya Pradesh?

As for yield, Indian wheat is said to average 3.5 tonnes per hectare. There are regional variations though. Importantly, we cannot ignore climate impact. There is suspicion our yields may be plateauing. Also, unusual heat during the growing period can reduce yield up to 20 per cent.

India’s average yield of 3.5 t/ha is the same as global average, but that’s a small consolation. Average wheat yield in the European Union is 5.5 t/ha while in China it is even higher at 5.8 t/ha. Is there any lesson we can learn?

A serious issue relates to production data. Our official production estimate appears to be overstated by about 10 per cent last two years. The user industry does not trust the government data — not just of wheat but also rice, oilseeds and pulses.

If the government production estimates (107 million tonne for 2022 and 112 mt for 2023) were correct, we would not be facing the current alarming situation of tight availability, elevated prices and restrictive trade policies. Lower production is further corroborated by lower procurement by FCI again for two years in a row.

The wheat milling industry is the vital link between growers and consumers. The industry needs steady supply of raw material to meet consumer demand. But it finds itself handicapped because of inadequate raw material availability and administrative controls.

Unfortunately, New Delhi ignored the market signals and reality has come to bite. This was avoidable with a bit commercial intelligence and research as well as stakeholder consultation.

As early as April this year, this author had proposed three alternatives for the government: (1) import wheat on government-to-government account from Russia on rupee payment terms; or (2) buy ‘call option’ contract from an international exchange; or (3) allow private trade to import by withdrawing/reducing the customs duty. None of the above was acted upon, and the country finds itself in an awkward position now. New Delhi can no more be in denial as regards wheat production.

Multiple factors drive commodity markets. Usually supply shocks roil the market rather than the demand side which usually grows steadily. 

Mercifully, the government is reviewing its data collection and data management processes and has launched the Unified Portal for Agricultural Statistics (UPAg). It is hoped there will be flow of more credible data from the government side.

Looking ahead, say towards 2030, Indian wheat crop is likely to come under intense weather related pressure. If our economic growth ambitions materialise, even the demand side would turn robust. We risk becoming a wheat importer if ‘business-as-usual’ attitude continues.

The writer is a policy commentator and agribusiness specialist. Views are personal