Wheat prices across many mandis witnessed a sharp spike on Wednesday to cross a record Rs 2,300 a quintal-mark, due to slower supplies and robust demand. The prices are now 14% above the minimum support price (MSP).
According to officials, wheat supplies to mandis have declined in the last one week as traders are holding on to stocks purchased from the farmers by paying a premium over the MSP in anticipation of export possibilities.
The mandi prices were ruling around Rs 2,150 to Rs 2,175 per quintal since the ban on wheat export were imposed in May 14, 2022.
“Most of the traders had purchased wheat by paying around Rs 150 – Rs 200 per quintal as premium over MSP of Rs 2,015 to farmers during the procurement season in April in anticipation of exports surge,” Mukesh Khatod, a trader from Chittorgarh, Rajasthan, told FE.
Khatod said that after the government had imposed a ban on wheat export in May, traders are waiting for the prices to go up before they release their stock in the market.
According to a Reuters report, local wheat prices had jumped to a record Rs 2,354 per quintal on Wednesday.
Gagan Gupta, a trader in Sehore, one of the biggest mandi in Madhya Pradesh, said prices are ruling around Rs 150 to Rs 165 per quintal above MSP which are 7 to 9% above MSP because of slow arrival of grain in the market.
“We anticipate supplies to improve by early August, as traders who have stocks meant for exports will start liquidating it,” Gupta said.
In the current fiscal, India has exported around 3.5 MT of wheat. India shipped a record 7 MT of wheat worth $2 billion in FY22, against just 2.1 MT worth $0.55 billion in FY21.
Currently exports are being undertaken to cater for the genuine need for food security through government-to-government (G2G) routes
Domestic supplies of wheat have been impacted by lower production because of the heat wave witnessed in March, considered as the maturing stage of the crop.
Another factor impacting the prices as the Food Corporation of India (FCI) would not undertake open market sale of wheat for lack of sufficient stock due to sharp fall in procurement this season.
In the rabi marketing season (April-June) for 2022-23, wheat procurement by FCI dropped by more than 56.6% to 18.7 MT against 43.3 MT purchased from the farmers in the previous year. Lower procurement has been attributed to decline in production.
On July 1, wheat stocks in the central pool stood at 28.5 MT against the buffer norm of 27.5 MT, the lowest since 2008.
According to agriculture ministry data, wheat output in the 2021-22 crop year (July-June) declined by around 3% on year to 106 million tonne (MT) from 109 MT.
According to traders’ estimates, wheat production this year is around 98-99 MT while the US Department of Agriculture’s Foreign Agricultural Service has estimated India’s wheat production at 99 MT.
With the annual domestic consumption estimated at 86-88 MT, the stock situation is getting tight.