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Informist, Friday, Apr. 18, 2025

 

By Afra Abubacker

 

NEW DELHI – The government has saved more wheat in its coffers by not selling the food grain aggressively under the open market operations in 2024-25 (Apr-Mar). This, along with likely higher procurement, may help improve availability of wheat in FY26, market participants said. With supply being comfortable, they see prices of the commodity correcting and rule out imports. 

 

The opening stock of wheat with the government as of Apr. 1 was 11.8 million tonnes, up from 7.5 million tonnes last year. This is 4.3 million tonnes above the buffer norms for Apr-Jun. "The government did not aggressively sell this year (FY25) and has kept stock in its kitty," an official from the Food Corp. of India, said. "Also, some 400,000 tonnes were already procured and added to the central stock pool in March," he added. FCI started procurement early in March instead of April.

 

The agency wrapped up its open market sales last month with only 3.00 million tonnes against the record 9.41 million tonnes sold in FY24 to check prices in view of the General Elections. "It was unnecessary of them to have kept back a lot of wheat and not sell. They allowed prices to go high," G.K Sood, farm expert, said. With prices ruling above INR 3,000 per 100 kg levels in February, there were cries for reducing the 40% import duty on wheat. 

 

On Thursday, the all-India average wholesale price of wheat was INR 2,824.7 per 100 kg, up nearly 4% from last year, but down 4% on month, according to the consumer affairs department. Month-on-month, prices are easing with arrivals of the new crop to the market and experts do not see any dire need for imports. 

 

However, some observe that the government has prioritised building stockpiles rather than checking prices. "We had low stocks for the last 2-3 years. Government is now on the exercise of building stocks," Dinam Sood, general secretary of Roller Flour Millers' Association of Punjab, said.

 

The year FY25 opened with just 7.5 million tonnes, the mandated buffer quantity. And FY24 opened with 8.3 million tonnes, just a little over the buffer norm. Some say the market may also be keen to stock as they had grappled with very dry pipelines, and prices surged above INR 3,000 levels in February.

 

"They had messed up wheat by bringing in stock limit and less OMSS (open market sales)," Pramod Kumar S, former president, Roller Flour Millers Federation, said. In 2024-25, the government tightened stock limits thrice between June and March. Towards the end of the year, a wheat trader or wholesaler could not stock more than 250 tonnes. 

 

From Apr. 1, the government has lifted stock limits on wheat. It has only mandated for disclosure of stock position every Friday. "The damage has been done, and market has now moved on to the next crop," he added.

 

Market participants believe that private purchases will increase this year, and more farmers will hold on to stocks on hope of lucrative prices next year. "Everybody is likely to stock up because of good prices this year. Wheat prices were the highest this year," Kumar said.

 

Dinam Sood estimates private purchases in Punjab to increase to above 1 million tonnes from 650,000 tonnes last year. "In Uttar Pradesh, private purchases will increase. There are many intermediaries," Sood said. The market expects the government not to reimpose any stock limit this year. "Stock limit has been perennial for the last two years. Now it's time to do away with it," he added.

 

Most market participants expect wheat procurement to be 28-29 million tonnes, against 26.6 million tonnes last year. Some expect procurement to be around 30 million tonnes, almost nearing the 31.3 million tonnes target. "Production is really good. Winter was perfect. Farmers will have 5%-6% higher output," Sood said. 

 

So far, 8.35 million tonnes of wheat have been procured, up 92% on year amid good production, official data showed. Bonus by Rajasthan and Madhya Pradesh over the minimum support prices has also boosted procurement. The government had pegged wheat output for 2024-25 (Jul-Jun) at a record 115.4 million tonnes, higher than 113.3 million tonnes last year. 

 

PRICE CHART

Market participants say wheat prices will correct, but will most likely stay above the minimum support price of INR 2,425 per 100 kg due to good demand. Rahul Chauhan, director of IGrain, sees wheat prices correcting to 2,600-2,700 in Delhi after having ruled above INR 3,000 in February.

 

Asked how prices are likely to remain bullish amid robust procurement and good production, Dinam Sood said "market sentiment is mostly bullish. People have got used to higher prices and they are bullish." "All depends on the holding capacity of private parties. Usually, they release stocks by Sept-Oct before paddy arrivals," he added.  End

 

Edited by Vandana Hingorani

 

 

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