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Informist, Thursday, Mar. 13, 2025

 

By Afra Abubacker

 

NEW DELHI – The Food Corp. of India sold nearly the entire 3.00 million tonnes of wheat allocated under open market sales for 2024-25 (Apr-Mar), but prices remain elevated. This, market participants said, was because the government reduced the allocation for open market sales as it had overestimated the wheat production in 2023-24 (Jul-Jun). In FY24, FCI had sold a record 9.41 million tonnes to check prices in view of the General Elections.

 

"The agriculture ministry overestimated wheat production. So according to the government, there is a lot of wheat in the country. And prices are high because trade is hoarding. But that is not true," farm expert G.K. Sood said, when asked why the government had offered less wheat in FY25, despite prices remaining high.

 

On Tuesday, the all-India average wholesale price of wheat was INR 2,950.1 per 100 kg, up 7.4% from last year but down 1.1% on month, according to the consumer affairs department. Month on month, prices are easing slowly with arrivals of new crop trickling into the market, but prices are still high due to the tight supply.

 

"Price tells demand-supply mismatch," Sood said. Traders would not hold on to stocks when prices are high, and even more when the new crop is good and arrivals are around the corner, he added.

 

According to the government, India is set to have a record-high wheat production of 115.4 million tonnes in 2024-25. For last year, it had estimated wheat output at 113.2 million tonnes. The trade consensus was 100-106 million tonnes for last year and 105-110 million tonnes for this year. 

 

The market had called the government's output figures inflated and had several times asked for import duty reduction.

 

However, the government has been sticking to its guns and clamping down on stock limits to check price rises. In the last nine months, the government has tightened stock limits thrice. Amid tight stock holding norms, a wheat trader or wholesaler cannot stock more than 250 tonnes till Mar. 31. In June, they could store 3,000 tonnes.

 

Interestingly, the government has stored more wheat in its godowns than last year. As of Mar. 1, wheat stocks with FCI were 38% higher on year at 13.4 million tonnes and only marginally below the buffer of 13.8 million tonnes for the quarter ending March.

 

Though FCI wrapped up its auctions last Wednesday, millers have asked the government to release an additional 500,000 tonnes amid tight supply. They have been urging the government to give more wheat as they expect FCI to have a higher ending stock of 10.0-11.8 million tonnes as of Mar. 31. Last year FCI closed with only 7.5 million tonnes as they actively sold the staple to cool prices amid the General Elections.

 

"FCI is likely to have 4 million tonnes extra than last year," Sood said. "Instead of squeezing the market pipeline and keeping back extra wheat with FCI, the government should have released it to the market," he added. The buffer norm for the April quarter is 7.5 million tonnes.

 

However, the government is unlikely to allocate any more wheat under open market sales, an FCI official said. "Though FCI made good revenue by selling wheat in just a few weeks, it has beat the purpose of OMSS (open market sales scheme) checking prices," he added. The official said revenue details for 2024-25 are yet to be compiled. Last year, FCI had a revenue of INR 260 billion through wheat sales under open market scheme, he added.

 

In 14 weeks, starting in December, FCI has been selling wheat at higher rates than its reserve price of INR 2,325 per 100 kg. Prices in the auction rose as millers competitively bid to bag more wheat from the government. The highest average selling price in 2024-25 was INR 3,031.6 per 100 kg.

 

FCI's cumulative average selling price of wheat rose to INR 2,799.8 per 100 kg in 2024-25, from INR 2,297 last year, the official said.

 

However, the situation does not look so grave in 2025-26. "Wheat situation next year looks comfortable with good production and higher opening stocks," Sood said. Though the market is divided if the government can meet the wheat procurement target of 31 million tonnes, most say procurement would be largely on par with 26.6 million tonnes last year.

 

"For sure, private purchases will increase this year. But procurement should be largely same as last year as production is higher," Dinam Sood, a Punjab-based miller said.

 

To procure more wheat, the Madhya Pradesh government has announced a bonus of INR 175 and Rajasthan INR 150 over and above the minimum support price of INR 2,425 per 100 kg set by the central government.

 

"This time Uttar Pradesh chief minister has taken a special interest in wheat procurement," G.K. Sood said. Though the Uttar Pradesh government has not announced any bonus for wheat, the state cabinet highlighted wheat procurement. The state will purchase wheat from Mar. 17 to Jun. 15. 

 

However, firm wheat prices are likely to persuade farmers to sell their produce to private traders. It is premature to peg wheat procurement as the "market situation is very dynamic" till April, the FCI official, said.  End

 

Edited by Ashish Shirke

 

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