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Informist, Wednesday, Sep 18, 2024

 

--Shivaji Mills MD: See wheat up 2-3% if no open mkt sales by Oct

--CONTEXT: Shivaji Roller Flour Mills MD on sidelines of Wheat Summit

 

By J. Navya Sruthi and Pallavi Singhal

 

MUMBAI – Wheat prices are likely to rise by 75 rupees per 100 kg or 2-3% next month, if the government fails to commence open market sales by then, Ajay Goyal, the managing director of Shivaji Roller Flour Mills Ltd, told Informist on the sidelines of The Wheat Summit today. "The market is still stable right now, as it fears that the government may begin open market sales at any time. However, they are getting impatient," he said.

 

The government hasn't held any weekly electronic auction so far for the wheat marketing season that began in April. This is mainly due to low wheat stocks with the government. 

 

"If the delay in holding open market sales goes beyond September, the market will definitely react and prices will see a spurt of 2-3% per 100 kg,” Goyal said.

 

Currently, wheat prices in Delhi are 2,840 rupees per 100 kg and those in Kota, Rajasthan, which is considered a benchmark market for prices, are 2,600-2,650 rupees per 100 kg.

 

In 2023-24 (Apr-Mar), wheat sales under the open market scheme were at an all-time high of 9.4 mln tn. Last year, the reserve price for fair and average quality wheat was 2,150 rupees per 100 kg and that for wheat of reduced specification quality it was 2,125 rupees per 100 kg.

 

Under the open market sales scheme, the government fixes prices of rice and wheat and sells them to bulk buyers such as states and private millers through electronic auctions. The government holds such weekly electronic auctions to moderate retail prices and increase supply in the market.

 

Goyal said 3,000 rupees per 100 kg is the danger mark for the government and that it "will not let it cross 3,000 rupees". The government seems comfortable with 2,900-2,950 rupees per 100 kg, Goyal said. "The government seems to be waiting to put all its firepower (of buffer stocks) in the last few months," he said. The months of January and February are critical and all the wheat would've been exhausted by then, because by that time it is almost nine months since the crop is harvested, Goyal said.

 

Farmers in Uttar Pradesh, which is one of the country's main wheat producing states, have not yet sold wheat, as they are looking for a better price at which they will realise higher profits, Goyal said. There also seems to be a gap of 3-4 mln tn between production and consumption, he said, adding that demand for wheat during October and November is always high due to festivals and increased consumption during winter.

 

On Friday, the government reduced the stock limits for traders and wholesalers to 2,000 tn from 3,000 tn earlier, and for processors to 60% of the monthly installed capacity multiplied by the remaining months in the current financial year ending March. However, there is no change in the stock limit for retailers, which will remain at 10 tn. The stock limit for big chain retailers has also been retained at 10 tn per outlet, but the total wheat big retail chains can hold has been revised to 10 times the total number of outlets from 3,000 tn earlier.

 

The government may sell about 5.5 mln tn of wheat, "that's what they have" or can sell in the market, Goyal said. "They will probably sell measly quantities in October, November to mid-December, and then they will put in all their might for (next) two months," he added. 

 

The government's wheat stocks as on Sep 1 were 25.1 mln tn, 3.3?low the Jul-Sep buffer norm of 27.58 mln tn. Wheat stocks were also down 3.4% on year and more than 6% lower than last month's stocks, according to Food Corp of India data.

 

According to buffer norms, the minimum wheat stocks for Jul-Sep should be 27.58 mln tn--operational stock of 24.58 mln tn and strategic reserve of 3 mln tn. The government sets the buffer requirement of food grains for every quarter, and the FCI has to maintain the mandated level.

 

The fall in wheat stocks is mainly due to lower procurement by the government during Apr-Jun. The government could not meet its wheat procurement target of 30-32 mln tn for rabi marketing season 2024-25 (Apr-Mar). Procurement of wheat ended on Jun 30, with the Centre managing to buy 26.60 mln tn from farmers, slightly more than 26.20 mln tn last year.

 

Goyal said the government seems determined not to import wheat and "sailing through this year with the existing stock management in some format or the other". The government must import at least 3-5 mln tn of wheat to stabilise prices, he said. Importing 3-5 mln tn of wheat will be "good in terms of supply scarcity, you know this everyday anxiousness about pricing and government intervention and things like that and (will) also (be) good for the consumer," Goyal said.  End

 

Edited by Ashish Shirke

 

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