Wheat prices ruling high, as no open market sales by FCI

The Food Corporation of India (FCI) decision not to sell open markets from wheat to fiscal bulk buyers because low stock levels have forced flour to buy seeds from traders at higher prices.

In the last decade, due to strong wheat procurement, FCI has sold surplus wheat stocks in the open market after the procurement season (April-June) ended at a reserve price that includes the Minimum Support Price (MSP), transportation and other costs.

In FY22, FCI has sold more than 7 million tons (MT) wheat in open markets whose prices are set at around 8% more than MSP year procurement of seeds.

This fiscal, FCI has set the price of wheat reserves in 2,200 per quintal Hospital until October 2022 against MSP amounting to 2,015 A Quintal Hospital.

With FCI’s decision to stop OMSS because it plunged into wheat stock due to lower procurement this season, floor grinders depend on private traders to buy their wheat requirements.

“We are currently looking for wheat around 2,300 A Quintal Hospital in Delhi against MSP from RS 2,015 A Quintal,” Ajani Bisarawal, President, Indian Roller Flour Millers Federation, told FE.

He said that the price is expected to rise in the coming months because of a tight supply situation which is exacerbated by the inability of FCI to sell seeds in this fiscal open market, first in the last decade.

Meanwhile, the price of wheat in many mandis watched a sharp surge last week to pass the 2,300 RS record per quintal sign, due to slower supply and strong demand. Current price is 14% above MSP.

According to officials, the supply of wheat to Mandis has declined in recent weeks because traders hold on to shares purchased from farmers by paying premiums over MSP to anticipate the possibility of exports.

In the current rabbis marketing season (April-June) for 2022-23, wheat procurement by government agencies fell more than 56.6% to only 18.78 MT to 43.34 MT purchased from farmers in the previous year.

The government placed sidewalks on wheat exports in May, even when the global market seemed very remunerative for exporters.

The step is to remember local supply constraints.

Domestic wheat supply has been influenced by lower production because the heat waves witnessed in March, are considered as the stage of planting plants.

On July 1, wheat stock in the middle of the pond was established at 28.5 MT against Norma Buffer 27.5 MT, which was the lowest since 2008.

According to data from the Ministry of Agriculture, wheat output in the plant year 2021-22 (July-June) decreased by around 3% in the year to 106 MT from 109 MT.

According to traders’ estimates, this year’s wheat production is around 98-99 MT while the US Agriculture Agriculture Department of Agriculture Services estimates Indian wheat production in 99 MT.

With annual domestic consumption estimated at 86-88 MT, the stock situation is getting tougher.