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Mandi wheat prices rule up to 19% above MSP, despite export ban.
Aug 17, 2022

Wheat prices at key mandis across the country are ruling around 14%-19% above the minimum support price (MSP) of Rs 2,015 a quintal for the current rabi season (2022-23), as traders are holding on to stocks in anticipation of a further rise in prices in the build-up to the festive season, industry sources told FE.

Traders’ action has blunted the impact of a ban on wheat exports, imposed on May 13 to keep domestic supplies steady, amid a drop in production. In fact, according to the wholesale price inflation data released on Tuesday, price pressure in wheat jumped to 13.61% in July from 10.34% in the previous month.

Wheat prices have touched Rs 2,400 a quintal at Sehore, one of the biggest mandis in Madhya Pradesh, while those are ruling around Rs 2,300 a quintal in Chittorgarh mandi, Rajasthan. Arrivals, meanwhile, have been quite sluggish for the last few weeks.

In Delhi, flour millers are buying wheat at around Rs 2,350-2,400 a quintal.

The spike in prices is despite the government imposing restrictions on wheat exports in the middle of May and the recently imposed export restrictions on all types of flour made from wheat, including semolina (rava flour or suji) and refined flour (maida).

'Most of the traders had purchased wheat by paying around Rs 200-250 per quintal as premium over MSP from farmers during the procurement season in April in anticipation of exports surge and they have already incurred cost of storage and interest on the bank loan availed,' Mukesh Khatod, a trader from Chittorgarh, Rajasthan, said.

According to Khatod, once the mandi prices touch Rs 2,500 a quintal, traders would start selling in the market. Since the government had imposed a ban on wheat export in May, traders are waiting for the prices to go up before they release their stock in the market.

Gagan Gupta, a trader in Sehore, said that prices are expected to rise further due to coming demand because of the approaching festive season.

'Prices of wheat are likely to remain on a higher side till the arrival of fresh wheat crop in April as many traders, who still hold stock, have incurred cost of buying wheat mostly from Madhya Pradesh at Rs 2,500 per quintal,' Ramesh Sharaf, president, Gujarat Flour Millers Association, said.

This year the Food Corporation of India (FCI) will not undertake open-market sale of wheat from the surplus stocks, after many years of lower stocks and sharp fall in procurement this season.

In FY22, the FCI had sold more than 7 million tonne (mt) of wheat in the open market for which the price was fixed around 8% more than the MSP of the year of procurement of the grain.

Meanwhile, the Haryana State Cooperative Supply and Marketing Federation (Hafed) on Tuesday decided to sell more than 0.1 mt of wheat in the open market. This comes after the flour-milling industry recently met the food secretary and informed him about the dwindling availability of wheat in the market.

Hafed had purchased 0.2 mt of wheat at above the MSP prices for exports.

In the rabi marketing season (April-June) for 2022-23, wheat procurement by the FCI dropped by more than 56.6% to 18.7 mt against 43.3 mt purchased from the farmers in the previous year. Lower procurement has been attributed to decline in production.

On August 1, wheat stocks in the central pool stood at 26.6 MT against the buffer norm of 20.5 mt (for October 1), the lowest since 2008.

According to agriculture ministry data, wheat output in the 2021-22 crop year (July-June) declined by around 3% on year to 106 million tonne (mt) from 109 mt, the trade estimate suggests wheat out of around 98-99 mt. The US Department of Agriculture’s Foreign Agricultural Service has estimated India’s wheat production at 99 mt.

In the current fiscal, India has exported around 3.5 mt of wheat. India shipped a record 7 mt of wheat worth $2 billion in FY22, against just 2.1 mt worth $0.55 billion in FY21.

Currently, exports are being undertaken to cater for the genuine need for food security through government-to-government (G2G) routes.

financialexpress.com

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