Wheat prices crash on weight of record crop, higher stocks

Procurement doubles; mills, private trade may keep off Haryana, Punjab.

M.R. Subramani

Chennai, April 1 As the official rabi arrival season began on Wednesday, wheat prices crashed on the weight of a record crop in the offing and higher buffer stocks.

Prices dropped to Rs 900-925 a quintal in Uttar Pradesh, while in Kota, Rajasthan, it was quoted at Rs 1,020 a quintal, much below the minimum support price (MSP) of Rs 1,080 fixed by the Centre for the current season.

“Wheat is being delivered to mills in Karnataka from Uttar Pradesh at Rs 1,240-1,260 a quintal. Most of the private purchase seems to be taking place there in the absence of any worthwhile procurement by Government agencies,” trade sources said.

Last year, Uttar Pradesh contributed about 55 lakh tonnes (lt) to the buffer stock. Agency reports said the Centre had procured nearly two lt of wheat so far this year against 86,000 tonnes last year and traders said procurement began in Punjab on Wednesday. “It is set to begin in Haryana tomorrow,” they said, adding that private trade and flour mills would not be buying from those States.

Of the two lt procured, 1.56 lt were from Madhya Pradesh against 79,000 tonnes last year. Buffer stock, meanwhile, was reported at 140 lt, above the norm of 50 lt for April 1.

“In Punjab and Haryana, the Centre will have to buy all the wheat brought to the markets by farmers. Private and multinationals will keep off as total procurement cost there works out to nearly Rs 1,300 a quintal due to market cess, traders’ commission, labour charges and packaging,” said Mr Raj Sud, a trader from Khanna, Punjab.

Even in New Delhi, prices were quoted at Rs 1,142 a quintal. “If you work backward, taking off labour, packaging and transportation charges, it works out to around Rs 950,” said a miller in Punjab.

Mr Sud said the crop was good in almost all parts of the country and production could be better than last year’s 78.4 million tonnes.

There are two issues to the current situation, according to traders. One, how long would the flour mills or private trade procure even from Uttar Pradesh. “Flour mills are buying only two months of their requirement. One month requirement is in the mills and another month’s in the pipeline,” said a miller from Karnataka.

“Mills in the North already have stocks of last year. Therefore, they may not enter the market at all for now,” said Mr Sud.

In Kota, private purchase is nearly 3,000 tonnes now, while the Government is procuring only 500 tonnes a day.

Second is what would happen once official procurement ends on June 30. “Prices could crash. But we have to wait for the next Government. We don’t know what will be its policy. Also, global prices are lower with chances of recovery being remote,” said trade sources.

“The Government can hardly store 20-23 lakh tonnes in Punjab and Haryana, from where 50 per cent of the total procurement takes place,” said the sources. With officials saying procurement will be on as scheduled, a clear picture may be available after two weeks.

Source: HBL