Wheat prices fell by over 13% to Rs 2550/quintal in key mandis in Madhya Pradesh, Haryana, Punjab and Rajasthan on Monday, from a record high of around Rs 2950/quintal prevailed last week. In the Delhi wholesale market, the prices dropped by 11% to Rs 2830/quintal from Rs 3204/quintal prevailed last week.
This fall in prices follows the government’s decision to liquidate 3 million tonne (MT) of wheat from the Food Corporation of India (FCI) stocks in the open market over the next six weeks. Wheat retail inflation rose by 22.2% in December.
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The prices are, however, still above Minimum Support Price (MSP) of Rs 2015/quintal for the current marketing year (2022-23). If prices remain firm for a longer period, the options before the government include allowing imports of the cereal. However, as of now, given the expectations of robust rabi crop, policy-makers are confident that the price will cool further in the coming weeks.
“Traders and stockists have started to liquidate the stocks following the announcement of open market sale,” Gagan Gupta, a trader in Sehore, one of the biggest grain mandi in Madhya Pradesh, told FE.
The FCI has fixed base price of Rs 2350/quintal, excluding freight costs from the depots for the weekly wheat auctions commencing February 1. FCI’s economic cost of the grains which includes MSP, storage, transportation and other costs is of Rs 2654/quintal.
Traders and flour millers said that the wheat and atta (flour) retail prices are going to decline further by the middle of February, after bulk buyers buy wheat from the FCI’s weekly auction.
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At present, the FCI has wheat stock of 15.7 MT against the buffer norm of 13.8 MT for January 1. As per the food ministry’s assessment, the wheat stocks held with FCI by April 1, 2023 would be a comfortable 9.7 MT against a buffer of 7.4 MT.
While 2.5 MT of wheat would be sold through e-auction by March 15, 2023, 0.3 MT of wheat will be offered to government PSUs, corporates, Kendriya Bhandar and Nafed under this special scheme, subject to the stipulation that the buyer will convert wheat to atta and offer it to the public at a maximum retail price of Rs. 29.50/kg.
The state government agencies will be offered 0.2 MT of wheat to be distributed at retail levels.
The FCI had earlier stopped the sale of wheat in the open market from its stocks for the first time more than a decade in view of a sharp drop in procurement in the 2022-23 rabi marketing season and additional allocations of the grain under the free ration scheme. The FCI’s open market sales stood at 7 MT in 2021-22 and 2.5 MT in 2020-21.
Wheat output in the last crop year (July-June), had declined by around 3% on year to 106.8 MT because of heat waves during the flowering stage of the crop in March.
Due to lower production and higher global demand, FCI’s procurement in the 2022-23 marketing season fell by more than 56.6% to only 18.8 MT against 43.3 MT purchased from the farmers in the previous year.