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Informist, Monday, Nov. 4, 2024

 

By J. Navya Sruthi

 

MUMBAI – Diwali has brought cheer to wheat dealers as prices of the staple grain have risen significantly in key markets across the country. This is against expectations of a slight fall in prices because of end to festival demand. Traders and other market participants now expect prices to remain firm until the new crop starts arriving mid-March. A few traders also see further upside in wheat prices.

 

In Delhi, wheat prices Monday opened higher by 2% at INR 3,125 per 100 kg, but slightly below the all-time high of INR 3,150.

Prices had risen 1% in October because of festival demand, after having risen by nearly 8% in September because of lower stocks and uncertainty about the government's open market sales. Post-Diwali, prices have also increased significantly in Mumbai and other key markets such as Kota in Rajasthan.

 

In Mumbai's Vashi market, prices of mill-quality wheat Monday rose by INR 150 to INR 3,300 per 100 kg. In Kota, prices were at INR 2,800 per 100 kg, against INR 2,730 before Diwali. Arrivals in Kota were around 6,000 bags (1 bag = 50 kg) on Monday against 10,000 bags a week ago, according to local traders. The arrivals will decrease as rabi sowing is likely to begin in a week in the region, they said.

 

"Actually, it (rise in prices) was all expected because the market was hoping that by September the government would start open market sales of wheat. Since it did not come through, whatever stock was available in the market, it kept getting absorbed. Now the stock in the market is very low. So this single aberration will continue until there is visibility of availability. And it doesn't seem to end before mid-March, when the new crop will be there," Ajay Goyal, managing director, Shivaji Roller Flour Mills Ltd. told Informist.

 

Wheat prices are rising due to lower arrivals and lack of cues from the government on open market sales or reducing the 40% import duty, traders said. "There are no wheat stocks in (the) domestic market," Aniket Mehta, a local trader in Kota, said.

 

"There is no wheat in south India, which led to higher demand for the staple," Devendra Vora, a wholesale wheat trader, said. In Bengaluru, wheat prices on Monday were at INR 3,350-3,320 per 100 kg, according to a miller. "These high prices were mainly due to farmers and stockists holding stocks and rising consumption of the grain while production remains steady," the miller said.

 

With prices in Mumbai's Vashi market shooting up to INR 3,300 per 100 kg on Monday, Vora expects wheat prices to rise to a new all-time high of INR 3,500 if the government does not start open market sales before the new crop arrives, which will be only after March.

 

Technical analysts see wheat prices in Delhi rising to INR 3,300 per 100 kg this year, Goyal said. "If demand moves up, then I don't think anything can contain the market besides government sales," he said. He said prices may remain steady if there are some arrivals and demand is low.

 

The government is silent on open market sales as it believes there is sufficient stock of about 8-9 million tonnes with private traders as per declarations they have to submit every Friday. Earlier, it had also said there is no requirement for wheat imports, while most experts and traders suggest a cut in 40% import duty on wheat or government-to-government imports will cool down wheat prices.

 

Another solution to curtail wheat prices is to reduce the stock-holding limits for stockists. A few experts who spoke at The Wheat Summit held in Mumbai on Sept. 17-18 said the government may further lower stock limits to 500 tonnes by February.

 

The government reduced the stock limits for traders/wholesalers to 2,000 tonnes from 3,000 tonnes earlier and for processors to 60% of the monthly installed capacity multiplied by the remaining months in the current financial year ending March. Earlier, the limit for processors was 70% of the monthly installed capacity multiplied by the remaining months of the year. End

 

Edited by Ashish Shirke

 

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