Arrivals may pull wheat price below Rs 800

Fresh mandi arrivals are likely to push wheat prices below Rs 800 per 100 kilograms (ex-mill) in the harvest season starting from mid-March, said market players on the sidelines of a seminar organised by Wheat Products Promotion Society.

"Prices are expected to fall from the second week of April once mandi arrivals are in full swing. However, as the country is expected to face a supply crunch in the next financial year with minimal quantity in the pipeline, prices are seen firm," said Anirudh Agarwal of Agra Roller Flour Mills, one of the country's largest mills with a capacity of 10,000 silos.

Last year, wheat prices had fallen to Rs 720 per 100 kg (ex-mill) when the minimum support price (MSP) under the Central government's price support system was Rs 640 per 100 kg. For the current crop, the government has raised MSP to Rs 650 per 100 kg.

While the government is hopeful of procuring about 16 lakh tonne of wheat this year, compared with 14.7 lakh tonne last year, most private players including millers and traders say the government would not be able to meet the target. "Farmers are not willing to sell the crop at MSP when they see prices rising to Rs 1,100 per 100 kg in lean season. Thus, if the government does not announce any bonus, it is unlikely to meet its procurement target," said a Belgaum-based miller.

As the harvest season is just about to begin, the government cannot raise MSP. Thus, the option of extending bonus to farmers of Punjab, Haryana and Uttar Pradesh can help meet official procurement targets, said a Food Corporation of India official.

The import of 5 lakh tonne of wheat, set to start from March-end, is unlikely to pull the prices lower as the quantity in pipeline is bare minimum, Agarwal added.

Official estimates peg current wheat crop at 73 million tonne compared with 72 million tonne last year. Industry estimates for the current crop, however, are between 68-72 million tonne.

Today, spot wheat prices (ex-Delhi) are about Rs 880-900 per 100 kg.

According to a Delhi-based miller, "Two rakes of wheat (of 2,000 tonne each) from Gujarat are scheduled to arrive in Delhi, in a day or two. One of the rake would be sold at Rs 925 per 100 kg and the other one would be partially sold (about 1,000 tonne) at Rs 915 per 100 kg".

However, this premium is likely to fall as arrivals begin in full swing. Gujarat's wheat crop commands a premium over that of other states as it is of superior quality with little moisture and high protein content.