Stocks of wheat and rice with government agencies have plunged to a five-year low, even as retail cereal price inflation soared to a 105-month high in September.
According to data from the Food Corporation of India (FCI), wheat and rice stocks in public godowns totalled 511.4 lakh tonnes (lt) as on October 1. This was as against 816 lt a year ago and the lowest for the same date since 2017 (see table).
Wheat stocks, at 227.5 lt on October 1, were not only at a six-year low, but also just over the minimum buffer (three-month operational stock requirement plus strategic reserve to meet procurement shortfalls) of 205.2 lt for this date. However, rice stocks (inclusive of grain derived from un-milled paddy) were nearly 2.8 times the necessary levels. As a result, the overall cereal stocks position was relatively comfortable, despite FCI warehouses holding less grain compared to even four years ago.
The depleting stocks come even as the consumer price index (CPI) for “cereals and products” rose 11.53 per cent year-on-year in September. That was the highest-ever annual inflation for cereals as per the current price index, which has 2012 as its base year. Going by the old CPI, with 2010 as the base year, the previous highest cereal inflation was recorded in December 2013, at 12.14 per cent. That was eight years and nine months back.
Depleting FCI stocks are a concern, especially in wheat. Annual retail inflation for non-PDS (public distribution system) wheat and atta flour hit an all-time high of 17.41 per cent in September, up from 15.72 per cent, 11.73 per cent, 10.06 per cent, 9.45 per cent, 9.59 per cent, 7.77 per cent, 5.57 per cent, and 5.10 per cent in the preceding eight months. Possibilities for the price to ease are limited, as farmers are yet to sow wheat and the next crop would start arriving in the markets only after mid-March.
Compounding the uncertainty are international prices. Prices of the benchmark wheat futures contract traded at the Chicago Board of Trade exchange dropped from a record $12.94 a bushel on March 7 to $7.49 on August 18. But the escalating tensions in Ukraine have since led to a renewed surge and prices closing at $8.82 per bushel on Wednesday (one bushel equals 27.216 kg).
According to the US Department of Agriculture’s latest world grain trade report, the export price of wheat from Russia has in the last one month gone up from $313 to $327 per tonne, free on board. The prices or increases have been even more for wheat from other origins: European Union ($334 to $359), Australia ($372 to $376), Canada ($369 to $402), Argentina ($400 to $420) and the US ($392 to $459). Adding ocean freight and shipping insurance will take the landed cost of even Russian wheat to $365-370 per tonne in India. That comes to Rs 30-30.5/kg at the port, rendering imports unviable unless done on a government account with a view to replenishing public stocks.