Costly wheat and the cloud over our daily bread - Sayantan Bera

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published Published on Feb 3, 2023   modified Modified on Feb 3, 2023

Wheat prices have stayed stubborny high in India, despite several steps by the government including an export ban and announcing open market prices.

- Mint

Official figures show that daily retail wheat flour (atta) prices as on 1 February were 22% higher year on year, while wholesale prices were 31% higher. Wheat prices have been inching up through 2022 after a heat wave cut production and pushed the government to ban exports in May. Retail food inflation has softened of late, as it dipped to 4.2% in December from 8.6% in September. Any hope of prices cooling rests on the size of the 2023 harvest, which will hit markets in April-May. 

Planting data from the Agriculture Ministry show that wheat has been sown in over 34 million hectares, higher than the 5-year average of 30 million hectares. The crop is likely to be higher than 107 million tonnes estimated for the 2022 harvest. Key risks remain however. For instance heat stress.

The Food Corporation of India held 17.1 million tonnes of wheat, the lowest in 6 years, but higher than the strategic buffer norm of 14 million tonnes. The government announced open market sales of 3 million tonnes to cool market prices, which means the Centre does not have excess stocks. Traders expect the government to announce a bonus to farmers to ensure procurement does not fall short. With wholesale prices around Rs. 2,800 per quintal and an MSP of Rs. 2,125 the gap is big. Without a bonus farmers may sell their crop in the open market.   

The export ban will most probably continue. If procurement falls short the government may cut the existing 40% duty to allow imports. However, if India enters the global market as a buyer international prices will surge. The larger crisis is the impact of climate change on India's fragile food surpluses. 

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Sayantan Bera, Mint, 3 February, 2023, https://www.livemint.com/news/india/costly-wheat-and-the-cloud-over-our-daily-bread-11675362565596.html


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