As the third e-auction of wheat by the Food Corporation of India (FCI) reaches the market and at a much lower selling price than the January price, price of the cereal in the physical markets has declined by 30 percent from January highs.
Wheat prices hit an all-time high in January 2023 at Rs 3,200/quintal on lower availability and as the government’s buffer stock fell to six-year lows due to lower procurement last year, when the crop was impacted by heatwaves and private traders picking up wheat at higher prices.
But after the government came into action, announcing 3 million tons of wheat sales via FCI in January and then adding another 2 million tons to the procurement, prices have declined.
The Food Ministry has held meeting with millers, food associations, packaged food makers and advised them to cut prices of atta and atta-made products – efforts that have had an impact at the wholesale level and will soon reflect in retail prices.
The government’s sales come at a time when the new wheat crop also will soon start arriving in the market. While there was urgency to get wheat during to the market in the first tranche, which sold for a much higher level. With each following tranche, wheat availability has increased and prices fallen.
Crop prospects
The FCI has offered wheat at lower prices with every tranche. The first tranche saw higher interest in participation and the wheat was auctioned at a much higher price. The prices since then have been on a decline and the third tranche now comes at Rs 2150, not too far from MSP of Rs 2015.
The fall in prices also ensures that the government will be able to procure a higher quantity of wheat for its buffer stock, although the trade is already in a loss due to the price difference between the first and the second tranche. The Govt has taken a lot of measures in past year to keep inflation in check as Madhya Pradesh, Chhatisgarh and Rajasthan to polls in less than a year. With selling wheat in open market, the consumers have been taken care of and the govt will procure from farmers at MSP.
Crop prospects, as of now look good, with the government pegging the wheat crop higher for 2022-23 at 112.2 million tons vs 107.7 million tons in 2021-22.
The US Department of Agriculture has raised its 2022-23 global wheat production forecast to 783.8 million tons with consumption estimated at 791.2 million tons and ending stocks at 269.3 million tons
The only concern from the sector is a heatwave that can impact yield. And learning from the last year, the Centre has set up a panel to monitor the impact of a heatwave.
Until now, the industry has reported no untoward impact. The days are warm, but the nights cool. If that changes, the crop numbers forecasts may take a hit.
