Wheat prices have jumped 4% in the last one week and festival season demand expected to kick in from mid-September, they are expected to rise further, despite the government claiming that the country has sufficient stocks.
Denying some reports claiming that India was going to import wheat, the Department of Food and Public Distribution of the central government issued a statement on Sunday saying the country has enough stock of wheat to take care of its domestic requirement and for the public distribution system.
Mill grade wheat prices increased by Rs 1/kg last week to range between Rs 24kg to Rs 25.50/kg in north India. “Heavy rainfall in the region reduces movement of wheat and the unwillingness of the stockists, who expect higher prices, resulted in prices going upward,” said Navneet Chitlangia, vice president, the Roller Flour Mills Federation of India. (RFMFI).
“Presently, the demand for flour is sluggish. However, as the festival season purchases of bulk consumers are likely to begin from September 10, prices are expected to increase further,” said Chitlangia.
In its fourth advance estimate issued this month, the government has pegged 2021-22 wheat production at 106.84 million tonnes. However, a big section of the trade does not trust this figure.
“The crop figure that the government is telling us seems to be too high. It doesn’t match. If the government numbers are correct, then why is the wheat trading at this price in the market? It should be much lower,” said a top executive of a global commodity trading house, requesting not to be identified.
In the absence of any other mechanism to know correct production figures, the trade and industry believe that India’s 2021-22 wheat crop could be between 90 million tonnes to 94 million tonnes.
Rajesh Jain Paharia, an exporter of wheat said, “Wheat prices in India are rising because there is a mismatch between demand and supply.”
As the adverse impact of the heat wave on wheat production became apparent, India banned wheat export in May followed by restrictions on export of wheat products like atta and maida, which brought the prices down temporarily.
Now the industry thinks the government may gradually use other tools of price control like voluntary disclosure of stocks and removal of import duty.
Traders say that making import duty on wheat zero will not be useful in near future as domestic prices are much higher than the landed price of imported wheat.
Globally, wheat prices have started cooling, which makes the trade believe that there could be some import parity post-Diwali if the duty is removed.
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