A higher base price fixed by the Food Ministry to sell wheat through the open market sale scheme for bulk users and small traders has led to a lukewarm response in the latest tender.
According to sources, against one lakh tonnes earmarked for sale on December 7, only four bids were received for buying 1,450 tonnes.
“The poor response is due to the higher reserve (base) prices. The Centre will have to cut it because it makes sales of wheat products unviable,” said a source.
In another development, roller flour mills in Kerala have urged the Food Ministry to cut the minimum price at which wheat is offered to bulk users to Rs 1,650. Lowering the price from Rs 1,778 fixed on November 16 will help in better offtake by bulk users and small traders, according to P.K. Ahammed, President of Kerala Roller Flour Millers Association.
In a letter to the Food Ministry, he said bulk buyers were hesitant to bid for wheat from the open market sale as global wheat supply next year is expected to improve on better crop from the US, Ukraine and Australia.
Also, the wheat crop from Gujarat will begin arriving from February. With hopes of another bumper crop, prices are expected to decline. In such a situation, bulk users are caught in two minds, Ahammed said.
A cut in the reserve price will benefit consumers as mills will pass on the benefit to them, he said. The Centre in November raised the price for open sale for the fifth time since July.
Wheat prices have surged this year despite a record production of 93.9 million tonnes. Prices have surged mainly on the Centre procuring a record 38 mt and demand for exports.
Over three million tonnes of wheat have been exported this year on lower crop in the US and the Black Sea region, particularly Russia and Ukraine.
Wheat prices are currently ruling at least 50 per cent higher than the same period a year ago. For example, wheat at Etawah market in Uttar Pradesh is currently quoting at Rs 1,430 a quintal against Rs 970 last year.In the futures market, wheat for January delivery is ruling at Rs 1,583 a quintal.