What does the decrease in the central wheat stock mean for prices and production?
As global wheat prices hit record highs this year, in part because of the Russian-Ukrainian war, bread makers in India have looked to multiple price hikes. Today, a loaf of sliced brown bread costs Rs 50 while multi-grain bread costs Rs 65.
This one is brought to go up still.
India’s wheat stock in the central pool fell just above buffer standards.
The Food Corporation of India, which maintains stocks of wheat and rice in the central pool, is required to maintain a minimum amount of grain at the beginning of each quarter to meet operational needs and requirements at all times.
For wheat, that number is 27.58 million tonnes for the July-September quarter.
The latest data shows that grain stocks held by India’s central grain purchasing agency, as of July 1, stood at 28.51 million tonnes.
This is due to lower purchases by Food Corporation of India and lower production during the 2021-22 crop marketing year.
Usually, July 1 sees peak inventory levels as the maximum wheat is purchased in April, May and June.
The last time wheat stocks in the central pool were below this, on July 1, was in 2008.
So far in FY23, CFI has spent Rs 37,852 crore to procure 18.78 million tonnes of wheat, down almost 59% from the same period last year . The supply target has been revised downwards to 19.5 million tonnes from 44.4 million tonnes previously.
Last year, the government spent Rs 85,600 crore to buy a record 43.34 million tonnes of wheat from farmers.
This time, farmers opted to sell their wheat harvest to private traders, who offered prices above the minimum support price.
Lower FCI purchases, in turn, mean big savings.
Another reason for the drop in purchases is the drop in wheat production due to a sudden increase in temperatures in mid-March.
Wheat production in the 2021-22 crop year that ended in June was estimated at 106.41 million tonnes, according to the third advance estimate.
The government had originally forecast this year’s wheat output at a record 111.32 million tonnes.
Harsh Wardhan, Fellow, ICRIER, says prices will rise as FCI will not make any open market sales. Millers will have to buy from traders at inflated prices and there will be increased production and purchases next year. Selective exports will continue, he says.
As the heat wave reduced production and pushed domestic prices to record highs, the government banned most wheat exports from mid-May. He also reduced the wheat allocation in Prime Minister Garib Kalyan Yojana and the National Food Security Law.
The reduction in the wheat quota will be compensated by rice, to manage the central stocks of wheat which are dwindling.
The FCI is also not expected to make open market sales this year, which will put pressure on domestic prices.
Wheat being a rabi crop, the next harvest is far away. The fallout from global and local factors means there is no relief on the horizon for consumers.