As wheat starts arriving, traders/ millers wonder how prices will move this year
With the government set to discontinue sale of wheat under the open market sales scheme (OMSS) once procurement starts, flour millers and traders in the north are worried about how the market price will move this year as excessive government controls have kept prices under check artificially.
Besides, by extending the export ban and getting into retail sales of atta (wheat flour) directly to consumers through cooperatives Nafed and NCCF, the Centre has maintained a uniform reserve price across the country in the weekly e-auctions conducted by the Food Corporation of India (FCI), which started on June 28. Besides, the Centre has also imposed a stock holding limit until March 31.
“Earlier, OMSS prices were fixed on ex-Ludhiana basis and the freight cost was added to the place of delivery. So, there was no distortion in the market. But this year, the government has offered wheat at a uniform rate, the same for Punjab and Tamil Nadu, by subsidising freight and other costs,” said a flour miller.
Though this was done ostensibly to keep prices in a certain band, it has upset the normal demand-supply economics and the impact could be more damaging whenever such controls are removed, said the miller requesting not to be named.
“As farmers sell the maximum quantity of wheat during April-June, stockists buy it to supply throughout the season and it is the normal practice not only in wheat, but all other agri commodities. But this year could be different. No one knows what the wheat production will be. Even if it is bumper crop, the government is under pressure to buy as much as possible, amid a depleting Central Pool stock. With the fear of a stock limit order, both stockists and processors will be cautious in buying,” said Veena Sharma, former secretary of the Roller Flour Millers’ Federation of India.
Last week, the government said the weekly e-auction under OMSS will be stopped from March 1 in states where procurement starts, though official buying will be dependent on market arrivals. Uttar Pradesh has agreed to start wheat procurement from March 1 if the fresh crop starts arriving. The Centre is keen to begin procurement in states during the first fortnight of March.
Wheat arrivals in the agriculture market yards (mandis) of Madhya Pradesh were close to one lakh tonnes in past one week, with Dewas reporting over 7,000 tonnes, Dhar more than 5,000 tonnes, and Ujjain over 4,000 tonnes, according to Agmarknet portal. The average price in the mandis was more than the minimum support price of Rs 2,275/quintal, though in Dewas it was Rs 2,075/quintal due to local variety and high moisture. In Dhar, wheat (Lokwan variety) sold at an average Rs 2,500/quintal, and in Ujjain (all varieties) at Rs 2,380/quintal last week.
Mandis in Gujarat also reported the arrival of over 25,000 tonnes, with the highest arrivals in Junagarh at 11,560 tonnes at an average price of Rs 2,300-2,350/quintal last week.
The government has sold nearly 9 million tonnes (mt) of wheat to processors during the past eight months under OMSS.