Wheat procurement declines 38% at 15.3 million tonne

Amid a surge in exports and reports of a decline in production which have pushed mandi prices above the minimum support price (MSP), wheat procurement by the Food Corporation of India and state government agencies has declined sharply compared to the previous year.

MSP purchases of wheat stood at 15.3 million tonne (MT) on Thursday, down by more than 38% from the year-ago level.

Sources told FE this year’s wheat procurement would be around 20 – 22 MT against the target of 44 MT.

Currently, mandi prices of wheat in key producing states like Punjab, Haryana, Madhya Pradesh and Uttar Pradesh are ruling at 8-10% above the MSP of Rs 2,015 per quintal.

The sharpest fall in wheat procurement this session has been in Uttar Pradesh, Haryana and Rajasthan.

In Uttar Pradesh, the biggest producer of grain, where the state government has purchased just 0.11 MT of wheat so far, while it had procured 0.87 MT during the same period in 2021.

According to an Uttar Pradesh food department official, the main purpose of the MSP-based wheat procurement initiative was to ensure that farmers are not paid prices below MSP and there was no distress sale of the commodity. “Now that farmers are getting better prices in the market, our purpose is achieved,” the official said.

In Haryana so far, wheat purchase from farmers has declined by more than 50% to 3.69 MT against 7.5 MT of purchase during the same period last year.

In Rajasthan, only a small quantity of wheat has been purchased by government agencies against 0.67 MT procurement last year.

More than 8.35 MT of wheat has been procured in Punjab so far against 9.6 MT of grain purchased during the same period last year. Punjab is the second-biggest producer of wheat in the country and also contributes the highest volume of grain to the central pool.

Madhya Pradesh, which had announced incentives such as the abolition of mandi taxes and other levies from the wheat purchased for export, state civil supplies corporation till Thursday has procured 3.1 MT of wheat against 5.8 MT purchased during the same period last year.

In other key producing states such as Uttarakhand and Himachal Pradesh, the wheat procurement has been rather sluggish so far.

“We are currently buying wheat at the price of Rs 22.50/kg, which is above the MSP of Rs 20.15/kg,” Shammi Agarwal, managing director, Pansari Group, a Delhi-based FMCG major, stated.

This time, wheat procurement is being keenly watched as a surge in exports because of disruption in global supplies over the Ukraine-Russia conflict has pushed up demand for wheat from India.

India is aiming at exporting 10 MT of wheat in 2022-23. In 2021-22, India exported a record 7 MT of wheat.

There are also concerns about the drop in wheat production in the 2021-22 crop year (July-June) because of unusually high temperatures during the end of March which had impacted the yield. However, the agriculture ministry is still sticking to its estimates of 111.32 MT of wheat production this year compared to 103.88 MT in the 2020-21 crop year.

At the National Kharif Conference held last week, agriculture minister Narendra Singh Tomar, however, ruled out any drop in wheat production this year. But going by the feed-backs from key mandis, the production could be at least 10% lower than the estimate.