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Informist, Friday, Mar. 7, 2025

 

By J. Navya Sruthi

 

MUMBAI – The market is divided on the prospects of the government meeting its target to procure 31 million tonnes of wheat in the rabi marketing year starting April. While a few market participants say that the target will be mised for the fourth consecutive year, others disagree, saying chances of higher production this year are likely to bring prices down. 

 

After a record purchase of 43.3 million tonnes of wheat in 2021-22 (Apr-Mar), the government's procurement dropped to 18.8 million tonnes in 2022-23, against the target of 44.4 million tonnes. For the next two years, too, the performance was weak, with procurement at 26.2 million tonnes against the target of 34.15 million tonnes in 2023-24, and 26.6 million tonnes the next year compared to the target of 30-32 million tonnes. 

 

The government did not meet the procurement target in last three years because of lower output of wheat, as adverse heat conditions and erratic monsoon led to lower yields. These factors drove prices of wheat to hit record highs, weighing on the government's procurement programme. In January 2023, wheat prices in Delhi hit a record high of INR 3,250 per 100 kg, when the minimum support price for 2022-23 was INR 2,015 per 100 kg.

 

Since then, wheat prices have been firm, at least 20% higher than the government's minimum support price. In January, wheat prices in Delhi hit a new all-time high of INR 3,350 per 100 kg, against the minimum support price of INR 2,275 per 100 kg for 2024-25. For the rabi marketing year starting Apr. 1, the government has set the minimum support price of wheat at INR 2,425 per 100 kg.      

 

Rahul Chauhan, director of IGrain, said it is tough for the government to meet its wheat procurement target of 31 million tonnes this season, and it may procure only 25 million tonnes as prices are still above the minimum support price of INR 2,425 per 100 kg despite arrivals of the new crop in Madhya Pradesh and Gujarat. This, he said, pointed to a dry pipeline and firm demand. 

 

Ajay Goyal, managing director of Shivaji Roller Flour Mills, told Informist, "The government can at best touch 23-24 million tonnes in my opinion although they have kept a high target. It is going to be very difficult for the government because wheat has seen very high prices this year, so I think some wheat will be held back with the farmer."

 

Recently, Madhya Pradesh and Rajasthan declared a bonus above the minimum support price of INR 2,425 per 100 kg to procure the cereal. While Rajasthan will pay a bonus of INR 150 per 100 kg, Madhya Pradesh will pay INR 175.

 

Whether this will help is anyone's guess.

 

Goyal said the bonus over the minimum support price is only driving prices in the market higher. "Barring a few centres, Rajasthan really doesn't have the machinery to procure large quantity, and the wheat varieties available in Rajasthan are also of better quality. And in the case of Madhya Pradesh, the maximum pressure from markets in south India and east India will be on the state's markets. So, I do not think procurement would be high in Madhya Pradesh also." 

 

On the other hand, market participants such as Gaurav Kochar say the government will not have any major problem in achieving its target. Kochar, a trader from Madhya Pradesh, said the procurement target is likely to be met because of the bonus provided by Rajasthan and Madhya Pradesh and expectations of higher production. Kochar expects wheat output at 105 million tonnes, against the government's target of 115 million tonnes. He, however, said he might revise his estimate after Mar. 14. 

 

A large section of market participants and industry experts say a clear picture about the government's wheat procurement and production will emerge only after three weeks, when rabi crop arrivals start trickling in. "Any prediction on procurement or production now is too early. There are three weeks before the crop comes in from the main wheat producing belts of Punjab, Haryana, and Uttar Pradesh," said a senior executive from a leading fast moving consumer goods company.  End

 

Edited by Avishek Dutta

 

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