India’s wheat stocks could be lowest in 3 yrs, but still higher than the needed buffer

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India’s opening stocks of wheat in the central pool are expected to be 19.5-20 million tonnes as on April 1, 2022, the lowest in the last three years, but much higher than the normative level required for maintaining a buffer and strategic reserve, trade and market sources said.

In accordance with the buffer and strategic reserve norms, India should have a wheat stock of 7.5 million tonnes in the central pool as on April 1 each year and this year’s stocks, though the lowest in the last three years, will still be over 160 per cent more than what is required.

On the export front, both government and trade sources are unanimous that this year (FY22) they will be 7-7.25 million tonnes, a record, while in the next financial year, they might touch even 10 million tonnes if the current momentum is maintained.

Of the 7-7.25 million tonnes of exports, the bulk (over 50 per cent) has been done by ITC, one of the country’s largest firms in the agro-business, while the rest has been shared by a clutch multinational trading companies that include Olam Agro and Cargill, trade sources said.

Official records show the government allocated 43.77 million tonnes of wheat and rice for the Pradhan Mantri Garib Kalyan Anna Yojana between May 2021 and March 2022, which was over and above the almost 55 million tonnes allocated for distribution through ration shops. In the coming financial year, most analysts say the Centre might not have to purchase the full target of 44.4 million tonnes of wheat if the current interest of private players in wheat continues. 

Already, Madhya Pradesh, one of the largest contributors of wheat to the central pool, is looking to lower its procurement target from 12.8 million tonnes to around 10 million tonnes. A lower procurement of wheat, along with lower carryover stocks, is sure to have an impact on the food subsidy for FY23, a good portion of which comes from wheat.

The subsidy, according to the FY23 Budget documents, has been estimated at more than Rs 2.06 trillion, which is 28 per cent less than the Revised Estimates of FY22. If there are no sudden emergencies and the procurement of wheat is lower than the target, it will help the Centre to manage the subsidy requirement.

Meanwhile, a section of traders said the Centre should raise the price of grains it sells through the Open Market Sale Scheme (OMSS) from the current Rs 2,150 per quintal to at least Rs 2,400 to align it with the prevailing market rates.

“Or else, a drawdown from the central pool stocks of wheat could be higher in the next financial year as players could look to purchase wheat from the Food Corporation of India at a cheaper rate and export it at higher price overseas,” a trader from a global firm said.

Indian wheat prices in world markets shot up to around $360 per tonne (FOB) a few days back in the aftermath of the Russia-Ukraine crisis, cooling a bit to $340-350 per tonne. The current price of Indian wheat is the cheapest among all global competitors and the absence of Ukraine and Russia from the world markets for the next few months will give Indian traders a chance to ship record quantities this financial year and even in FY23. 

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