Decline 20 per cent this month; higher minimum support price restrains fall in other foodgrains.
An increased supply through kharif crop harvesting has pulled the prices of rice down almost 20 per cent in December. Other foodgrains, including wheat, corn and sorghum, held up on a high minimum support price (MSP), coupled with supply shortage.
The price of the benchmark Lichkari variety of non-basmati rice fell between Rs 800 and Rs 900 to trade between Rs 3,200 and Rs 3,300 a quintal on December 22, while the normal basmati variety plunged by Rs 1,500 a quintal. Among other foodgrains, wheat (Lokwan) shot up by a marginal Rs 50 a quintal, while millet and sorghum rose by Rs 32 and Rs 82 a quintal, respectively.
“We have witnessed consecutive bumper years for both wheat and rice. On the back of this, the government is holding healthy stocks. At present, the supply is higher than demand, as farmers have continuously been releasing rice into the market, causing a supply glut. Therefore, rice stockists in the market, who procure the commodity at lower prices, have been the buyers. On the other hand, wheat has been maintaining a high price due to high MSP and lean-season sowing demand,” said V K Chaturvedi, managing director of Usher Agro, a BSE-listed foodgrain processing company.
Even as the harvesting, milling and storing season of paddy for individual farmers and stockists continues, the public sector Food Corporation of India (FCI) reported a stock of 20.36 million tonnes of rice and 31.43 million tonnes of wheat in its central pool as on October 1 — a significant decline from 22.71 mt and 33.62 mt, respectively, on September 1. The total stock of coarse grains declined to 89,000 tonnes on October 1 from 93,000 tonnes a month ago.
This being the harvesting and procurement season for rice, its stock jumped to 26.08 million tonnes on November 1 and further to 27.06 million tonnes on December 1. But, the inventory of wheat plunged to 29.67 million tonnes on November 1 and further to 27.66 million tonnes on December 1.
“This means, the government continuously released stock, not only through its public distribution system (PDS) but also through open-market sale. Today, the price of India’s non-basmati rice in the overseas market is ruling 10-15 per cent lower,” Chaturvedi added.
A report released by Care Ratings showed that the overall kharif foodgrain production was estimated to increase by 3.1 per cent, as forecast by the ministry of agriculture in its first advance estimates. The present rabi progress in terms of land under cultivation suggests the output level would be stable, and not increase significantly, unless there is a substantial improvement in yield per hectare. The target production for the rabi crop is set to stand at about 119 mt of foodgrains, taking the total crop production target to 245 mt of foodgrains for 2011-12.
Compared to last year, there has been a decline of around five per cent in the area under cultivation for all crops. A shortfall in cultivation has been witnessed in wheat and jowar, the two major rabi crops.
With food price inflation starting its descent on the back of a good kharif harvest, the rabi prospects are important, as these account for 50 per cent of the foodgrain production and 33 per cent of the oilseed output. So far, around 75 per cent of the normal area under cultivation has been covered, which paints a good picture of the prospects for the year.
“The government has already announced an MSP of Rs 1,285 a quintal for wheat, an increase of Rs 700 for gram and Rs 650 a quintal for mustard, which will exert pressure on wholesale prices. With the threat of not meeting the fiscal deficit target looming before the government, the question remains if the higher food subsidy on account of wheat procurement would be offset by lower procurement,” said Madan Sabnavis, chief economist, Care Ratings.
Sharad Maru, president, Grain Rice & Oilseeds Merchant Assoc-iation, however, termed the movement in prices of agri commodities a pure demand-supply arithmetic. He urged the government to remove curbs and open exports to fetch higher prices in the global market.
