Wheat stocks plunge to 15-year low

The food ministry is likely to set a target for rice procurement for the forthcoming season soon.

Piyush Goyal wheat
Food minister Piyush Goyal last month had urged states to grow more rice keeping in mind global demand.

Wheat stocks in the central pool held by the Food Corporation of India and state government agencies dipped to 26.6 million tonne (MT) at the beginning of this month, the lowest level since August 1, 2008. According to estimates, the wheat stock is expected to be around 22. 9 MT by October 1, against the buffer norm of 20.5 MT.

Depletion in wheat stock is attributed to a more than 56% drop in procurement in the current rabi season to only 18.8 MT against 43 MT purchased by FCI and agencies in the 2021-22 season (April-June) because of lower production and the free ration scheme being implemented since May 2020.

Wheat output in the 2021-22 crop year (July-June), as per the agriculture ministry, has declined by around 3% on year to 106 MT because of heat waves during the flowering stage of the crop in March.

Rice stocks as on August 1, 2022, with the FCI was 27.9 MT. This stock excludes 13 MT of rice yet to be received from millers. According to the assessment, rice stock could fall to 20 MT against the buffer norm of 10.2 MT by October 1.

The government has purchased more than 58 MT of rice in the 2021-22 season (October-September) so far and overall procurement in the season is likely to be 60 MT. In the previous year, rice procurement was a record 60 MT.

Also Read | Import duty on wheat to be scrapped

The government had revised the norms for phase VI of free ration scheme — Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) — in May by allocating around 11 MT of more rice while reducing wheat allocation by the same quantity.

The next procurement season (2022-23) will be commencing on October 1. With the fall in paddy sown area being close to 13% against a year ago because of deficient rainfall in eastern states so far, there is a possibility of drop in rice production which could impact the grain’s procurement. The actual rice stocks haven’t plunged below the buffer requirement at least since 2000.

Trades sources told FE that although the production of rice is unlikely to be impacted in the key procuring states such Punjab, Haryana, Chhattisgarh, Odisha, Andhra Pradesh and Telangana because of adequate monsoon rainfall in these states, there is a possibility of prices of paddy ruling above minimum support price (MSP) of Rs 2,040/a quintal in these states because of private players buying up grain over the possibility of a loss of output, which could adversely impact procurement.

The food ministry is likely to set a target for rice procurement for the forthcoming season soon. Food minister Piyush Goyal last month had urged states to grow more rice keeping in mind global demand.

As reported in FE last month, rice stocks in the central pool are likely to plunge below the buffer norm by 2.2 MT or 16%, if PMGKAY is extended to the whole of the second half of the current financial year.

Launched in 2020 as part of the Covid-19 relief measures, 5 kg of grains are distributed free under PMGKAY to more than 800 million beneficiaries every month free of cost. Additionally, these people also get an equal quantity of highly subsidised food grains under the NFSA.

The economic cost of foodgrain procurement by the FCI, which includes expenses such as minimum support price payment to farmers, procurement, acquisition and distribution costs, etc, for rice and wheat are estimated at Rs 3,670 and Rs 2,588 per quintal, respectively, for 2022-23.

Also Read | Wheat prices ruling high, as no open market sales by FCI

The government distributes rice and wheat to beneficiaries under NFSA at Rs 3 and Rs 2 per kg, respectively.

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