Less cash and low stocks make wheat prices climb

In wheat, the situation has been worsened by stocks with FCI — at 18.84 million tonnes (mt) as on November 1 — at a nine-year low.

Written by Harish Damodaran | New Delhi | Published: November 19, 2016 3:11 am
wheat, wheat trade, india wheat trade, wheat trade india, demonetisation, demonetisation effects, demonetisation news, india news While Krishi Bhawan has estimated the 2015-16 wheat crop’s size at 93.5 mt, private trade has pegged it as low as 80 mt.

Wheat prices have spiralled, reflecting the precarious domestic stocks position and concerns over production of new crop because farmers are unable to arrange sufficient cash for cultivation operations, following the demonetisation of Rs 500 and Rs 1,000 currency notes.

Wheat was sold at a range of Rs 2,338-Rs 2,379 per quintal at the Food Corporation of India’s (FCI) latest e-auction of stocks from its depots in Delhi on November 17. This was higher than the Rs 1,943-Rs 1,959 and Rs 2,124-Rs 2,129 rates at the preceding weekly e-auctions held on November 11 and November 3, respectively.

“Prices initially fell after the demonetisation decision on November 8 because the general feeling was that millers and traders would be cash-strapped, making it difficult to undertake purchases. But now, it seems that lack of cash with farmers, which could potentially impact sowing and cultivation operations of the new crop, is a real concern,” said trade sources.

Significantly, though, the Agriculture Ministry’s latest data released on Friday shows the total area sown under wheat in the current rabi season was 79.40 million hectares (mh), marginally higher than the 78.83 mh covered during the same period of last year.

“Sowing, as such, may not be affected because farmers normally use a portion of grain retained from the previous year’s crop as seed; not many buy fresh seeds every year for planting of wheat. The more serious issue is whether there will be enough cash with them to buy inputs and pay for labour as the season progresses,” said sources.

“The Centre should immediately allow farmers to purchase seeds, fertilisers, pesticides and other inputs in kind from primary agricultural credit societies or district cooperative banks using the demonetised notes. These outlets can accept the old Rs 500 and Rs 1,000 notes against their kisan credit cards or agricultural pattadar passbooks (land title deeds). This is the only way to help farmers make timely purchases today,” said G Ravi Prasad, president (corporate affairs), Coromandel International Ltd, India’s largest private phosphatic and complex fertiliser manufacturer.

In wheat, the situation has been worsened by stocks with FCI — at 18.84 million tonnes (mt) as on November 1 — at a nine-year low (see chart). This was largely a result of last year’s crop being affected by poor soil moisture levels, aggravated by high temperatures and absence of winter rains.

While Krishi Bhawan has estimated the 2015-16 wheat crop’s size at 93.5 mt, private trade has pegged it as low as 80 mt. It has led to millers contracting imports of 3.5 mt, of which roughly 1.4 mt has arrived, so far.

“There is scope to import another 0.3-0.4 mt at the most before March 31. By then, the crop, whose planting is now on, would be ready for harvest. The government cannot take any chances with its production because we don’t expect wheat stocks with FCI of April 1 to be more than 6 mt, which is below the minimum buffer norm of 7.46 mt for that date”, said sources.

Pritam Singh Hanjra, a farmer from Urlana Khurd village in Haryana’s Panipat district, said that most farmers in his area had procured their initial stock of di-ammonium phosphate and urea before demonetisation happened.

“This was used at the time of sowing, which is already 90 per cent complete in Punjab and Haryana. The second round of application will be 25-26 days after sowing, for which cash is required. In Uttar Pradesh and other states, wheat sowing is yet to begin and farmers there could have problems in procuring fertilisers without adequate cash,” he said.

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  1. A
    amit singh
    Nov 19, 2016 at 5:38 am
    Ground reality complete different from what you projected, is it find any positive thing in demonetization.??
    1. D
      Nov 19, 2016 at 4:38 am
      Expenses are already high in a dangerous label.to buy the food items we r paying 35℅high amount comparing 2 weeks ago..and another problem is lack of cash makes life more miserable and difficult...we don't have enough shops which accept ATM....now if scenario will not change we will have a catastrophic problem in our region...this is the story of my place West Bengal Siliguri.
      1. Mahender Goriganti
        Nov 19, 2016 at 1:10 am
        If in fact wheat and other food products prices go up it is good for farmers as support prices guarantee even more benefits for poor farmers. All prices will come down as the black money disappears and honest money need not compete with fake and black money.
        1. Mahender Goriganti
          Nov 19, 2016 at 12:34 am
          In fact in the next few weeks every thing from real estate to gold and everything in between lot cheaper for Am Admi, as honest money need not compete with fake /black money.
          1. R
            Nov 19, 2016 at 11:43 am
            Ok modi speak next week speak. You are man not god. I loved you but you killed india. You knew we love you and will embrace any action by you and you and your party took advantage of your pority. You selectively leaked news of demonetization before nov 8th to industrialist friends. 500 crore weddings, mallaya is free all in same week, you are friend of only the rich. Today kejriwal in his subzimandi speech showed clear proof how much crores you took in 7 bribes in gujarat. He cannot publicly lie in this day and age and your not objecting tells me it is true. lt;br/gt;Lifelong savings of poor are gone, after standing in lines for 24 hours they can get very little or no money, there is even hunger widespread in villages, the rich are completely unaffected, what have you done modi, killed an India which was going well, used your mother, speaking like laxman in speeches fooling people. Garreb logon ki hai lagegi, how horriblelt;br/gt;30% tax 200% penalty=90% lost. This is deliberate disincentive so that dalals of BJP-banks nexus can call on your phone and you can change old black notes to new black notes at prevailing 80% rate in Delhi at least- better as only 20% lost.lt;br/gt;All foreign media are saying this is what corrupt dictators do. Supreme Court is objecting although you control appointment of judges to SC. lt;br/gt;Resign modi resign. You turned out to be wolf in sheeps clothing
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