INDIA-Wheat prices in India have fallen nearly 13 percent following Prime Minister Narendra Modi’s government decision to release 3 million tonnes to bulk users such as flour millers.
Following the directive, wheat prices in New Delhi fell to Rs 28,290 (US$347.11) a tonne, down 13 percent from last week’s high owing to low stocks.
The decision did not however have an impact on domestic prices which are still higher than the state-fixed support or guaranteed price of Rs 21,250 (US$259.05).
Every year the government-backed Food Corporation of India (FCI) buys millions of tonnes of wheat at a fixed support price to build up the reserves needed to run the world’s largest food welfare program.
The corporation also buys wheat from local farmers to build strategic reserves to deal with emergencies like drought and uncertainties in the market.
However, the current price spike reflects a big drop in state purchases made in the previous year when FCI only bought 18.8 million tonnes, which is 53 percent less than what it bought in 2021.
The drop was attributed to open market prices, which remained above the rate at which the government buys the staple from domestic farmers.
According to FCI officials, the corporation does not want to experience the procurement drop this year which might affect domestic purchases from farmers hence the prompt action to release the 3 million tonnes.
“If prices drop, FCI will be able to buy reasonably sufficient quantities of wheat from farmers,” said the official with direct knowledge of the matter.
A surge in India’s wheat exports after Russia’s invasion of Ukraine pushed up local wheat prices, prompting India to impose an export ban in May, but this failed to stem the rise in local prices.
According to the agreement, the stocks are already late since they were supposed to be released in December and they are intended to ease the wheat shortage for manufacturers.
“The release of government stocks will help in easing shortages, but the stocks should have been released in December,” said a Mumbai-based dealer with a global trade house.
He added that “The government delayed the release of wheat and allowed prices to rise above the psychological level of 30,000 rupees (US$365.73).”
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