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Informist, Friday, Apr. 11, 2025

 

By J. Navya Sruthi

 

MUMBAI – The significant rise in wheat arrivals and the government's procurement higher than last year are indicators of a rise in wheat output, according to observers. They say wheat is unlikely to see another year of high prices but they dismiss the question if the government would allow exports. 

 

In the Second Advance Estimates, released on Mar. 10, the government had pegged wheat output for 2024-25 (Jul-Jun) at 115.4 million tonnes, higher than 113.3 million tonnes estimated for 2023-24. Similar to the government's estimate, the US Department of Agriculture also pegged India's wheat output at 115 million tonnes. However, the trade has estimated the wheat production at 105-110 million tonnes.  

 

G.K. Sood, a farm expert, said he expects wheat production this year at 108-110 million tonnes, against 105 million tonnes last year. Similarly, Rahul Chauhan, director at IGrain, said wheat output is around 110 million tonnes, higher than 100-105 million tonnes, which was his estimate for 2023-24. 

 

A senior executive from one of the top fast-moving consumer goods company said the wheat crop is estimated at 106-107 million tonnes, while the production was at 98-100 million tonnes last year. Experts and traders said the government numbers are always quite elevated than the reality.

 

"Temperatures have been benign, and downside worries (on output) have gone," Sood said. Favourable weather conditions have also soothed concerns over yield loss, he added. The arrivals pressure in local markets also weighed on the all-time high wheat price, hit during January. 

 

Wheat prices started to fall towards the end of January and are currently trading right above the minimum support price in a few local markets. In Indore, Madhya Pradesh, wheat prices were at INR 2,680 per 100 kg while those in Rajasthan's Kota were at INR 2,370 per 100 kg. Prices fell from the all-time high of INR 3,300 per 100 kg recorded in both the markets.   

 

Although the minimum support price for 2025-26 (Apr-Mar) was set at INR 2,425 per 100 kg, both Madhya Pradesh and Rajasthan state governments announced a bonus of INR 175 and INR 150 per 100 kg, respectively, over the minimum support price. Wheat prices in Delhi--the country's benchmark market--fell last week to as low as INR 2,625 per 100 kg from an all-time high of INR 3,350 per 100 kg in January. 

 

Higher supply and the bonus offered by state governments have spurred the government's wheat procurement for 2025-26. IGrain's Chauhan said the government may procure more than 28 million tonnes while the farm expert Sood sees purchases at 26-28 million tonnes.  

 

Since Apr. 1, the government's wheat purchases were nearly 2.0 million tonnes, which is 6% of the target of 31.27 million tonnes. Most of the wheat was also procured in Madhya Pradesh where the procurement stands at 1.65 million tonnes. Last year, the government bought only 26.61 million tonnes of wheat against the target of 30-32 million tonnes. The government did not meet its target last year because Madhya Pradesh was the major drag due to crop damages, unseasonal rain, and higher market rates.

 

These factors are likely to keep wheat prices away from the all-time high in 2025-26. "As we move away from (peak-arrival) season, prices are bound to rise but a run-away bullish market is unlikely this time," the senior executive official said. 

 

EXPORTS: MUCH FARTHER

Wheat prices were at significantly high levels in 2022-23 (Apr-Mar) due to lower production on account of El Nino conditions. As a result, the government banned wheat exports in May 2022 to increase availability in domestic markets. Similar weather conditions were in 2023-24 (Jul-Jun), which left wheat prices elevated in 2024-25 (Apr-Mar).

 

At some point, the market also asked the government to allow imports of the staple grain to curb soaring prices in the domestic markets. While wheat imports were not banned, the 40% duty on shipments is hefty enough for the traders to not to import wheat. However, there may not be any requirement to import wheat due to higher production this season.

 

Further, wheat stocks with Food Corp. of India were at 12.4 million tonnes as of Apr. 1, sharply higher than the buffer norm of 7.5 million tonnes, according to the nodal agency's data exclusively accessed by Informist. This leaves the country's wheat supply in a comfortable place but there is still a long way to go for the government to allow exports, experts said. 

 

The senior executive said the government had said it would not allow wheat exports but it should at least allow the shipments of wheat products like meslin, semolina, and others. The Indian government had banned exports of wheat products in August 2022 to manage food security and support other vulnerable nations facing high global wheat prices. India needs at least two bumper crops to resume exports, Chauhan said, adding that "one year of higher supply will not solve the problem."  End

 

Edited by Akul Nishant Akhoury

 

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