Wheat prices likely to soften by Rs 4-6 per kg over the next few weeks

But won't near MSP, which could make next procurement tough, unless there's bonus

Wheat prices in the open market might soften by another Rs 4-6 per kg over the next few weeks owing to the Centre’s decision on Wednesday to offload three million tonnes of the grain through a special-sale scheme, said trade and market sources.

However, chances of a big drop seem limited and prices will rule above the 2023-24 (April to March) minimum support price (MSP) of Rs 21.25 per kg.

This could make the Centre’s task to replenish its granaries in the new marketing season difficult unless it announces a bonus over and above the MSP for 2023-24, they added.

However, others felt that once new wheat crop starts hitting the market, prices in all growing states except Madhya Pradesh might drop below MSP provided production is good.

“The problem is the delay in announcing the open market sale. This means that for the end-user wheat will be available for 18-20 days, after tendering and transportation are over. It will also be the time when the early sown crop from the coming season might start arriving in Madhya Pradesh and Gujarat and no flour miller will opt for old FCI (Food Corporation of India) wheat when the new crop with a high protein content is available,” said Rahul Chauhan, commodity analyst at iGrain India.

He said in all probability wheat prices in the new crop season, which will start in April, could remain higher than the state-mandated MSP of Rs 2,125 per quintal. This will make procurement for the Central pool difficult unless the government announces a bonus above the MSP, he said.

The stocks will be sold by FCI during the next two months through various channels.

While wheat will be sold to bulk consumers through e-auction, FCI will offer it at Rs 23.50 per kg to public-sector units and cooperatives for converting the grain into atta and sell it to the public at the maximum retail price (MRP) of Rs 29.50 per kg.

“We welcome the government’s decision. It should have been taken a month ago. Wholesale and retail prices will come down by Rs 5-6 per kg,” Roller Flour Millers Federation of India President Pramod Kumar told PTI.

According to the government data, the average price of wheat in major cities stood at Rs 33.43 per kg on Wednesday, up from Rs 28.24 per kg a year ago.

Average prices of atta (wheat flour) stood at Rs 37.95 per kg against Rs 31.41 a year ago.

In order to address the rising prices of wheat and atta, a group of ministers headed by Union Home Minister Amit Shah met on Wednesday and discussed the buffer stock position of the country.

The committee decided wheat would be offered to flour millers, bulk buyers, etc through e-auction for a maximum of 3,000 tonnes per buyer per auction.

Wheat will also be offered to states and Union Territories for their schemes without e-auction.

 

“Wheat will be offered at a concessional rate of Rs 2,350 per quintal to government PSUs/cooperatives/federations, Kendriya Bhandar/NCCF/NAFED etc without e-auction.

“The sale under this special scheme will be subject to the stipulation that the buyer will convert wheat to atta and offer it to the public at a maximum retail price of Rs 29.50 per kg,” the ministry had said.

Chauhan of iGrain said: “Even the sale of wheat to Nafed to make atta will take time.”

FCI will offload wheat within the next two months. It will start the process of e-auctioning stocks immediately throughout the country from January to March.

Wheat production fell to 106.84 million tonnes in the 2021-22 crop year (July-June) from 109.59 million tonnes in the previous year due to heat waves in a few states. Procurement fell sharply to 19 million tonnes this year from around 43 million tonnes last year.

The area under coverage for wheat crops in the current rabi (winter-sown) season is slightly higher. The procurement of new wheat crops will commence in April.