Wheat prices cooling off

MARKET WATCH

After burning its fingers over wheat last year, the government may get some relief this time with prices stabilising. In the coming weeks, wheat prices may see a downtrend on the back of increasing production.

According to Agriculture Minister Sharad Pawar's announcement, new crop is estimated to be 7.4 crore tonne compared with 6.85 crore tonne last year. Incidentally, global output is also on an upmove.

On the production front, market expectation is even more optimistic. An MNC exporter of wheat to India said, "India may produce more than what the minister announced as our report suggests sowing of wheat continued till last week in states such as Gujarat and MP."

This year, monsoon lasted long and, hence, sowing started late, but its continuance till last week suggests that crop will be more than the earlier estimates. Rajasthan farmers are said to have more wheat rather than normal crop like coriander.

The country's wheat acreage has also grown rapidly in the ongoing rabi season, surging 22.5 per cent over the last year. An area of about 232 lakh hectares was covered till December 15 against 169 lakh hectares last year, according to official data.

As the wheat market is stabilising now, futures prices are hovering around Rs 1,060 a quintal with new arrivals just around the corner. However, spot prices are ruling slightly higher "� for instance, in the New Delhi market, wheat is quoting around Rs 1,090 a quintal.

Earlier, higher prices of wheat had prompted users to shift to alternatives such as bajra and jowar, and that too pushed the prices down to some extent. "We expect the prices to maintain the downtrend till the middle of April," said Devendra Vora of Navi Mumbai-based Friendship Traders.

He also expects a higher wheat crop as cold whether is very good for the crop and winter has set in the growing areas. But he pointed out that the real crop progress would be known only in the second half of January as cold whether would continue till that time. If temperature increased, recovery could be lesser than expected, he said.

This season, arrivals will start from February, and most of the crop is expected to reach the market by April. The government has already raised procurement prices for the current wheat season to Rs 750 a quintal. There are still many areas that require attention, if it wants to speed up procurement.

With increased procurement prices, MNCs and private players will have to pay further high price to compete with the government, which makes buying and stocking wheat from farmers a costly proposition.