The Lowest wheat procurement in 15 years

• From an all-time high last year, procurement of wheat is set to hit a 15-year low this season, falling below existing stocks for the first time.

Current Procurement Scenario

The 18.5 million tonnes (mt) likely procurement this time will be the lowest since the 11.1 mt bought in 2007-08.

• This is the first time that wheat procured from the new crop (18.5 mt) is less than the public stocks at the start of the marketing season (19 mt).

Reason for low Procurement

2 main reasons for procurement plunging to a 15-year-low this time -

1. Export Demand:

• In 2021-22, India exported a record 7.8 mt of wheat.
• Supply disruptions from the Russia-Ukraine war have led to skyrocketing prices and a further increase in demand for Indian grain.
• Indian wheat getting exported at about $350 or Rs 27,000 per tonne free-on-board (i.e. at the point of shipping)
• The farmers are realising well above the minimum support price (MSP) of Rs 20,150/tonne at which the government is procuring.

2. Lower Production

• The sudden spike in temperatures from the second half of March has taken a toll on yields.
• In most wheat-growing areas farmers have reported a 15-20% decline in per-acre yields.
• A smaller crop, in combination with export demand, has resulted in open market prices of wheat crossing the MSP in many parts of India.
• The shorter the distance to the ports, the higher the premium that exporter/traders have paid over the MSP.
• Many farmers are holding back their crops.
• Such “hoarding” by farmers was seen in the recent past in soyabean and cotton, too, again driven by soaring international prices.

Availability at Government level

With opening stocks of 19 mt and expected procurement of 18.5 mt, government agencies have 37.5 mt of wheat available for 2022-23.

• The normative buffer or closing stock requirement for March 31 is 7.5 mt.

Pradhan Mantri Garib Kalyan Anna Yojana scheme

• The last two years have also witnessed substantial offtake under the scheme.
• 10.3 mt in 2020-21 and 19.9 mt in 2021-22
• Open market sales to flour mills (2.5 mt and 7.1 mt, respectively).
• One can expect wheat prices to firm up and a rerun of what happened in 2006-07 and 2007-08.

Conclusion

The relatively tight supplies in wheat this time is compensated for by the comfortable public stocks of rice. A good monsoon should further augment availability from the ensuing kharif crop and tide over the shortages in wheat.

Exam Track

Prelims Takeaway

• Wheat procurement by the government
• Pradhan Mantri Garib Kalyan Anna Yojana scheme
• Export Demand of wheat