Government purchases may be impacted by record-high wheat prices

Traders and industry executives said it will be difficult to restock the depleted government granaries given the record-high wheat prices, which are currently nearly 50% higher than the minimum support price (MSP) of Rs 2,125 per quintal for the current 2022–23 rabi selling season. After Baisakhi, the pace of harvesting the new wheat crop will pick up (April 14).

Wheat used to be overstocked in the Food Corporation of India’s (FCI) warehouses until the previous year because farmers chose to sell their grain to the FCI at MSP rather than the open markets, which gave a price less than the MSP. However, the FCI’s purchases of wheat fell 56% in 2021–2022 as farmers sold their goods to private dealers.

According to industry executives, in the run-up to the 2024 general election, either the open market prices would have to significantly decrease or the government would have to pay a sizable bonus above the MSP in order for the FCI to purchase enough wheat to assure the nation’s food security.

According to Pramod Kumar S, president of the Roller Flour Millers’ Federation of India, “if we do not see any government action to cool down the wheat market, it may lower the purchase of wheat by the FCI” (RFMFI). Compared to 33 mt on January 1 of last year, the FCI has 17.2 mt of wheat on hand. 13.8 mt is the buffer norm for wheat stock as of January 1. When India had to buy 6 MT of wheat in 2017, the FCI’s inventories were last this low.

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