Despite a record production of over 93 million tonnes, domestic wheat prices have surged to a record high. Consumers, particularly flour mills, are facing a tough time since they are unable to get supplies though they are willing to pay a higher price.
The situation has turned grim in the last two days with prices on the futures market gaining over Rs 100 a quintal.
“Prices were up for September contracts by Rs 43 a quintal on Wednesday and by Rs 60 on Thursday,” said M.V. Balasubramaniam, Managing Director, Narasu’s Sarathy Enterprises Pvt. Ltd (formerly Narasu’s Roller Flour Mills).
On the National Commodities and Derivatives Exchange, wheat for September delivery ended at Rs 1,558 a quintal on Thursday. October contracts were quoted at Rs 1,583, November at Rs 1,609 and December at Rs 1,629.
In Shahjahanpur Agricultural Produce Marketing Committee (APMC) yard in Uttar Pradesh, the modal price or the rate at which most trades took place increased to Rs 1,450 a quintal on Thursday against Rs 1,350 on Wednesday.
The interesting fact about Thursday’s trade was that the offering almost trebled to 1,191 tonnes on Thursday from 411 on Wednesday.
“Wheat prices are quoting at 1,625 a quintal in New Delhi. Wheat has never scaled such a height,” said Raj Narayan Gupta, a miller in Uttar Pradesh. The New Delhi market is seen as the benchmark for wheat prices.
Huge Govt stocks
“Mills in the South are facing greater problems since traders are quoting Rs 1,900 a quintal for delivery here,” said Pramod Kumar, Executive Director of Sunil Agro Foods Pvt. Ltd.
“On Wednesday, we were offered at Rs 1,800. We are ready to pay higher prices provided we are assured of supply,” said Balasubramaniam.
Mills in South India are looking for stocks in view of the festival season ahead. “At this rate, we fear many mills may shut shop,” said Balasubramaniam.
Flour mills have been caught stranded since they did not build inventories during the peak arrival season of April-June.
“We did not stock up since the Government said it would release wheat from the stocks that the Food Corporation of India was holding,” said UP miller Raj Narayan Gupta.
Sunil Agro’s Kumar said: “The Government should resume the open sale scheme of wheat immediately.”
Narasu’s Balasubramaniam said: “The Government is holding huge stocks and is responsible for the current situation.” The Centre has procured over 38 million tonnes of wheat under the minimum support price (MSP) operations out of the record crop of 93.9 million tonnes.
Last year, production was 86.8 million tonnes. The stocks meant to meet any food emergency were bought at Rs 1,285 a quintal, the MSP.
Global fears
“While the Centre has garnered 38 million tonnes, traders have bought some quantity, while growers have retained wheat for seed and also expecting prices to rise on reports of drought affecting the US crop,” said Gupta.
Wheat prices on the Chicago Board of Trade have increased by 13 per cent this year to $8.9775 a bushel (approximately Rs 18,000 a tonne).
Not only drought in the US but also fears on nations in the Black Sea region such as Russia and Ukraine banning wheat exports are driving prices high.
Wheat from the Black Sea region seen at a par with the Indian foodgrain is currently quoting at $308 a tonne (Rs 17,000).
“We don’t get Black Sea wheat since we don’t buy in large quantities,” said Balasubramaniam.
Mills in the South are enquiring about Australian wheat. “Australia offers wheat in containers but prices are as high as Rs 24,000 a tonne,” he said.
The solution then, industry players say, is for the Government to take a few measures.
“The Government has to ban wheat exports,” said Gupta. However, Balasubramaniam said that exports by private traders should be stopped and all shipments should be done by the Government.
“Exporters are now buying for even Rs 1,600 a quintal,” said Balasubramaniam.
Though exact figures are not available, at least 10 lakh tonnes of wheat have been exported so far this year.
Exports are resulting in diversion of wheat meant for the public distribution system, said a miller who did not wish to be quoted.
“The other measure the Government can take is to release significant stocks at whatever price it deems fit,” said Gupta.
The Centre had begun selling wheat through open market sale scheme in July at Rs 1,175 a quintal but stopped it abruptly. Rumours were agog that it would resume sale at Rs 1,275 but nothing has happened so far.
“The Government has to prevent traders from buying wheat. Wheat is not consumed as it is,” said Gupta. “It has to stop the tender system since it is not helping millers to get wheat,” he said.