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Informist, Thursday, Apr. 3, 2025

 

By Pallavi Singhal 

 

NEW DELHI – While the market stands divided on India's wheat production in 2024-25 (Jul-Jun), with estimates ranging from 96 million tonnes to 110 million tonnes, almost everyone agrees that supply of the commodity will be as tight as last year, if not more. Many say higher procurement by the government could be key to keeping prices in check. 

 

At least eight industry leaders Informist spoke to estimate wheat production in 2024-25 to rise 1.5-2.0% to 107-110 million tonnes, in line with the government's estimate of a 2% rise to 115.3 million tonnes. A few experts, however, say production will be lower than last year.

 

"In absolute terms, government production numbers and market production numbers may differ starkly, but if we see in percentage terms, the rise matches with the government increase of 2%," said the deputy chief executive officer of a global agricultural business, on condition of anonymity. "We can see that government numbers have been rising, but so has the demand and consumption. Similarly, even though we see production 2% higher, we see consumption also rising by 1.5-2%." 

 

Sumit Gupta, director at Waseda Global, said, "The production situation is likely to slightly improve this year. However, with lower carryover stocks and a drop seen in wheat production globally, I see the situation tightening further." He cited data from the US Department of Agriculture, which shows global ending stocks in 2024-25 9.4 million tonnes at 260.1 million tonnes. 

 

Production in the major growing centres of Russia, Ukraine, and the European Union is seen lower, which is likely to add to the pressure on global wheat supplies, Gupta said. According to data from USDA, while production in Russia is seen down by almost 10 million tonnes, output in the European Union is expected to fall by 13.8 million tonnes. 

 

The International Grains Council has estimated global wheat stocks to drop to a multi-year low in 2025-26 amid a continued decline in production in some Asian countries. Carryover stocks could fall to 259 million tonnes from 264 million tonnes in 2024-25, according to the council. 

 

Meanwhile, higher temperatures in India have affected growth of the wheat crop in several areas of the country, according to agricultural economist Deepak Pareek. "I see India's wheat production this year between 96–98 million tonnes, marking a 2% dip from my last year's estimate of 98–100 million tonnes." He attributes this decline to slightly lower acreage in the Malwa belt of Punjab, where farmers have shifted to crops such as maize and potato. Also, the heat stress seen across Punjab, western Uttar Pradesh, and Madhya Pradesh has led to shrivelling of the grain and lower grain yield, he said. 

 

PROCUREMENT KEY

Despite expectations of tight supply, many traders say prices could remain stable if the government is able to meet its procurement target. For the 2025-26 rabi marketing season, the government has set a wheat procurement target of 31 million tonnes.

 

According to Rahul Chauhan, director of Igrain, if the government is able to procure anything over 28 million tonnes, prices can be controlled. "If the government somehow manages to procure this number, they would be in a better position to intervene and I assess will be able to offload over 10 million tonnes of wheat, which can keep prices cool through the second half of the year," he said.

 

However, some experts are sceptical about the effectiveness of government intervention. They argue that even if the government meets its procurement targets, it may not be enough to curb prices, owing to dwindling carryover stocks and a dry pipeline of supply.

 

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. 

 

In the last three years, the government fell short of its procurement targets because of lower production of wheat, as adverse heat conditions and erratic monsoon led to lower yields. These factors drove prices to record highs, which weighed 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. In January this year, prices in Delhi hit a fresh 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.

 

This season, the government has been proactive in procurement, as prices have fallen owing to high arrivals. While prices of wheat in Kota, Rajasthan, are at around INR 2,400 per 100 kg, the government is stepping in to buy the grain at the minimum support price of INR 2,425 per 100 kg.

 

Moreover, the Madhya Pradesh government has announced a bonus of INR 175 per 100 kg over the minimum support price of INR 2,425 per 100 kg, and Rajasthan has announced a bonus of INR 150 per 100 kg for the rabi marketing season, which is helping the government procure higher amounts of the grain.  End

 

Edited by Avishek Dutta

 

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