Wheat prices set to drop 10% on arrivals

Spot wheat prices are expected to decline by more than 10 per cent in the next one month owing to fresh arrivals and the government's decision to import half a million tonne.

In the last 20-odd days, standard wheat prices shot up by Rs 150 per quintal owing to acute shortage of supplies in southern states.

At present, the Lokwan variety of wheat is quoted in the range of Rs 1,050-Rs 1,200 per quintal, while dhadda is sold between Rs 1,050 and Rs 1,100 per quintal in Agriculture Produce Marketing Committee (APMC) market.

The prices, which were quoting at around Rs 875 a quintal at the beginning of December, sustained a steady increase through the month and, thereafter, rose fairly sharply in January to touch a high of Rs 1,012.50 per quintal on January 12.

Harvesting has already started and mandis in Maharashtra have already started seeing arrivals in small quantities. Arrivals for the season begins with Maharashtra followed by Madhya Pradesh. Punjab comes with an huge supplies at the end of the season. Therefore, wheat supplies continue for the next five months.

"The government's announcement to import 5 lakh tonne of wheat makes no sense at all when supply has already started. By the time the import order would be executed, supply would be in full swing across the countries. Hence, the import at this point of time is meaningless. Instead, the government could have imported in October or November last year," said Sharad Maru, president, Grain, Rice & Oilseed Merchant Association.

Rising freight rates owing to Supreme Court's verdict not to load more than 9 tonne has also added a lot to wheat prices as transporters are feeling the pinch of it.

Tightness would ease the availability in the market with increased supplies from Maharashtra and the price would fall dramatically, said Maru. Lean season on wheat would begin in April when supply resumes from all corners of the country.

The government has estimated a bumper crop of 75.5 million tonne in the current rabi season, which is 3.5 million tonne higher than last year.

Production is also likely to be the highest level of output since 1999-2000, which saw a record harvest of 76.60 million tonne.

The government is expected to procure 160 lakh tonne of wheat in fiscal 2007, that is 12 lakh tonne higher than the that of last year. Additionally, the government has decided to release 1.5 lakh tonne in the open market to control prices.

The good crop prospects expected is mainly attributed to the improved sowing pattern in wheat this rabi season. Cultivation of wheat is almost complete with the sown area up 1.5 lakh hectares (lh) to 261.5 lh compared with the corresponding period last year.

Last season (July 2004-June 2005), production was lower than anticipated at 72 million tonne compared with 72.11 million tonne during the pervious year. The deficit was thus made up by relying on stocks. This, however, meant that by January 1, 2006 stocks in the central pool had fallen below the buffer norm.

Stocks were around 62 lakh tonne, well short of the buffer norm for this period of 82 lakh tone, with the requirement for the PDS and welfare schemes amounting to around 13 lakh tonne a month. Since then stocks had fallen further to hit of a low of 47 lakh tonne by February 1, 2006.

The Centre has also made special additional allocations of 73,000, which has been distributed among six states , with Delhi and Tamil Nadu have been allocated 20,000 tonne each, Karnataka, West Bengal and Maharashtra receiving 10,000 tonne each and Kerala being allocated 3000 tonne. This is apart from the 1.5 lakh tonne additional release of wheat.