The domestic wheat market fundamentals are getting tighter and tighter following lower harvest and heavy shortfall in procurement during crop year 2021-22. Market rates have risen sharply and there is risk the situation may get out of control unless some drastic measures are taken soon.
As compared with the production target of 112 million tonnes(mt), wheat harvest size as estimated by the government was 107 mt, although a majority of private sector estimates point to harvest closer to 100 mt.
As of October 1, public stocks were 22.7 mt, barely above the buffer stock norm. This was because procurement fell short of the target by about 50 percent to less than 20 ml t.
Between October and March next year, about 15 mt will have to be released for publicly funded welfare programs which will take the inventory level to just about 7 mt, a multi-year low.
To be sure, the next domestic wheat crop will be available not before the end of March next year. The market has already taken cognizance of the tightening situation even as prices of wheat and wheat flour have risen sharply to levels not seen in a long time. It would be naïve on the part of policymakers to ignore the market signals.
It is imperative that supplies to the domestic market are augmented to rein in price rise. Russia’s wheat harvest for 2022-23 is at a record 91 ml t. It would be advisable for the government to import from Russia two to three ml t of wheat before the year-end. The decision would bring a semblance of calm to the bullish wheat market.
In any case, India imports large quantities of crude oil from Russia against Rupee payment. The same can be replicated for wheat import too. By importing Russian wheat we can avoid outgo of dollars.
New Delhi must remember that Indian wheat is at the limit of heat tolerance. Any repeat of what happened earlier this year – heatwave in March – can lead to disastrous outcomes in terms of production and prices.
Wheat production target for 2022-23 is set at 112 m t. The grain is usually planted in about 30 million hectares. Planting is going on apace in major growing states of Uttar Pradesh (9.7 m ha), Madhya Pradesh (5.9 m ha), Punjab (3.5 m ha) followed by Haryana, Bihar etc.
Ground reports from Punjab suggest excellent soil moisture and ideal conditions for sowing. Elevated market prices are expected to provide additional motivation for growers. Winter rains and cool day temperature in January and February would help.
Yet, weather risks cannot be overlooked. In four out of the last seven years, we have experienced unseasonal rains and hailstorm in March/April. A prudent risk management policy would be to augment supplies through import on government account.
(The author is a policy commentator and agribusiness specialist. Views are personal)