Wheat prices in key mandis of Madhya Pradesh, Haryana, Punjab and Rajasthan fell by close to 10% on Friday from a record high of Rs 2950/quintal, following the government’s decision to liquidate 3 million tonne (mt) of wheat stocks in the open market over the next six weeks.
“Traders have reduced purchase prices by Rs 200/quintal from a record Rs 2,950/quintal that prevailed earlier this week,” Gagan Gupta, a trader in Sehore, told FE. He said that traders who were holding onto the grain stocks have started to release them in the market.
The mandi prices were ruling around 40%-45% above the minimum support price (MSP) of Rs 2,015/quintal for the current season (April-June 2022-23) owing to supply constraints caused by last year’s low output. MSP for the next season is fixed at Rs 2,125/quintal.
Traders and flour millers said that the wheat and atta (flour) retail prices are going to decline by middle of February, after bulk buyers buy wheat from the Food Corporation of India’s (FCI) weekly auction.
According to Ashok Meena, chairman & MD, FCI, the corporation will be incurring a loss of around Rs 2-3 per kg on the wheat, which would be sold under an open market sale scheme (OMSS).
Against the OMSS base price of Rs 2,350/quintal, inclusive of freight costs, for the sale of wheat under OMSS, the FCI’s economic cost of the grains, which includes MSP, storage, transportation and other costs, is of Rs 2,654/quintal. The FCI will conduct its first e-auction for open market sale of wheat on February 1. According to Meena, 2.5 mt of wheat will be offered under e-auction, which will be supplied to flour millers mainly in depots located in Punjab (0.5 mt), Madhya Pradesh (0.5 mt), Maharashtra (0.4 mt), Rajasthan (0.25 mt), Bihar (0.15 mt), West Bengal (0.12 mt) and Haryana (0.1 mt) through weekly auctions till March 15.
The focus will be to offer wheat in a smaller quantity of 10 tonne per bulk buyer to a maximum ceiling of 3,000 tonne per buyer per region.
As on Friday, the FCI has wheat stock of 15.7 mt against the buffer norm of 13.8 mt for January 1. As per the food ministry’s assessment, the wheat stocks held with FCI by April 1, 2023 would be a comfortable 9.7 mt against a buffer of 7.4 mt. Besides, 0.3 mt of wheat will be offered to PSUs, corporates, Kendriya Bhandar and Nafed under this special scheme, subject to the stipulation that the buyer will convert wheat to atta and offer it to the public at a maximum retail price of Rs 29.50/kg. The state government agencies will be offered 0.2 mt of wheat to be distributed at retail levels.
The FCI had earlier stopped the sale of wheat in the open market from its stocks for the first time in more than a decade, in view of a sharp drop in procurement in the 2022-23 rabi marketing season and additional allocations of the grain under the free ration scheme. The FCI’s open market sales stood at 7 mt in 2021-22 and 2.5 mt in 2020-21. Wheat retail inflation rose by 22.2% in December 2022 on year.
According to the department of consumer affairs’ price monitoring cell data, the modal retail price of wheat and flour (atta) on Friday rose to Rs 30/kg and Rs 35/kg, respectively, from Rs 22/kg and Rs 28/kg six months ago.
Wheat output in the last crop year (July-June), had declined by around 3% on year to 106.8 mt because of heat waves during the flowering stage of the crop in March.
Due to lower production and higher global demand, the FCI’s procurement in the 2022-23 marketing season fell by more than 56.6% to only 18.8 mt against 43.3 mt purchased from farmers in the previous year.
India banned wheat exports to ensure domestic supplies in May last year.
In the current season, area under wheat has touched 34.1 million hectares (MH), against the last five-year average sown area of 30.4 MH, as per data released by the agriculture ministry last week.
Wheat, a key rabi or winter crop, is mostly grown in Punjab, Haryana, Rajasthan and Uttar Pradesh.