Wheat prices have started softening ahead of the harvest of yet another large crop that would commence in about a month's time prompting buyers to go slow their purchases. The lack of clarity on the Government's stand on exports of wheat from the Central Pool stocks is seen aiding the downward trend in the prices of the cereal.
Also the fact that BJP ruled states such as Madhya Pradesh and Rajasthan are unlikely to announce the bonus over and above the minimum support price of wheat, which could add to the pricing pressure, industry observers said. Buyers including the millers are waiting for clarity on the prices before deciding their purchase strategies.
"We are expecting the prices to fall drastically in the domestic market," said Pramod Kumar.S, Executive Director of Sunil Agro Foods Ltd, a Bengaluru-based miller.
Prices of wheat in the largest producing state of Uttar Pradesh have come down by Rs 40-50 per quintal in the past two weeks. The modal prices in key markets such as Hardoi have come down by Rs 80 to currently around Rs 1480 a quintal as against Rs 1560 a quintal on February 2.
"Since the current crop is expected to be as good as last year, there are more chances of prices coming down further," said M.K.Dattaraj, Managing Director of the Bengaluru-based Krishna Flour Mills Pvt Ltd.
On Wednesday, the Government said in its second advance estimates that wheat production could be 95.76 million tonnes for the 2014-15 season, almost same as that of last year. Favourable climatic condition is seen aiding the wheat production this year despite a marginal fall in acreage.
Further, the current wheat stocks are estimated at around 22 million tonnes, almost twice the buffer and strategic reserve norm for the period.
The Government plans to procure about 30 million tonnes of wheat during the current 2015-16 marketing season starting April. As against a target of 31 million tonnes for 2014-15, the Government had actually procured 28 m t.
Assuming the domestic consumption at the rate of 1.6 million tonnes per month over the next one year, the country will still be saddled with stocks of 25-30 million tonnes around this time next year, depending on how much the Government procures during the current season and allows exports from the current stocks, said Tejinder Narang, grains trade analyst.
Exports from India are currently unviable unless they are subsidised by the Government as the international prices are much lower than the domestic prices. Wheat exports in the April-December period stood at around 26 lakh tonnes, lower than the corresponding last year's 40 lakh tonnes.