Wheat prices in India set to rise?

By: | Published: July 27, 2016 5:57 AM

The agriculture ministry is likely to revise downward the quantum of wheat production for 2015-16 to 93.5 million tonne (mt) from 94.04 mt as per the third advance estimates released couple of months back.

drought crisis india, wheat importSources told FE following the new data generated from the states, the agriculture ministry is expected to marginally revise its wheat production figure in the fourth advance estimated which is expected to be released next month.

The agriculture ministry is likely to revise downward the quantum of wheat production for 2015-16 to 93.5 million tonne (mt) from 94.04 mt as per the third advance estimates released couple of months back.

Sources told FE following the new data generated from the states, the agriculture ministry is expected to marginally revise its wheat production figure in the fourth advance estimated which is expected to be released next month.

In the recently-concluded rabi marketing season, the Food Corporation of India (FCI), in collaboration with the state government-owned agencies, could procure only 23 mt of wheat from the farmers, which is a sharp fall from the 28 mt of grain purchased in the previous year. In 2014–15, the wheat output was reported at 86.53 mt while FCI purchased 28 mt from farmers.

Thus, questions were raised against the agriculture ministry’s data on wheat output for 2015-16. Interestingly, both in 2015 and 2016, the monsoon rains were deficient. The situation was severe in 2015, which recorded a rainfall deficit of 14% from the normal benchmark compared with 12% deviation in the previous year.

“This year, because of higher price prevailing in the open market, the farmers preferred to sell their produce to private traders than the FCI or any state government owned agencies,” an agriculture ministry official said.

The official also said that last year, due to unseasonal rains witnessed just prior to the harvest of wheat crops in northern regions, the government had relaxed the norms for quality of grain to be procured by FCI, thus leading to higher purchase by the government agencies. The official points out that wheat output data for 2011-12 and 2012-13 were 94.88 mt and 93.51 mt, respectively, while in case of corresponding procurement, the government agencies could purchase 38.14 mt and 25.09 mt of wheat from the farmers respectively. “The output and procurement data do not necessarily need to be synchronised,” the official said.

Meanwhile, mainly attributed to lower procurement of wheat by FCI, in the recently concluded rabi marketing season (2016-17), the corporation at present has a wheat stock of 30.2 mt against the norm of 27.5 mt for July 1. This leaves out a small quantity of grain to be sold through the Open Market Sale Scheme to bulk buyers.

Last month, the government had decided to extend the 25% import duty on wheat for another three months, mainly attributed to sufficient domestic stocks available in the country. In March this year, for the second time, the government had extended the 25% import duty on wheat till June 30, essentially to curb imports as domestic output is estimated to rise by more than 8% to 94.04 mt in 2015-16 from 86.53 mt reported in the previous year, despite deficient monsoon.

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