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This is an archive article published on May 30, 2005

Wheat worry

Depleting wheat production, fuelled by a steep drop in state procurement, has pushed up prices by a record 8 per cent. Current levels have t...

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Depleting wheat production, fuelled by a steep drop in state procurement, has pushed up prices by a record 8 per cent. Current levels have touched a peak of Rs 800-825 per quintal, despite the harvest season — when the market usually bends down to excess supply.

India’s second-most preferred grain may be lying low, but it will result in increased hedging. ‘‘The picture is still hazy as regards futures, but we will know by the first week of June when the procurement is over,’’ says Ajay Goel, former chief, Roller Flour Millers Federation of India.

Goel points to the import angle to quench the demand. ‘‘The prospect of importing duty-free wheat must be considered. The trade should also be de-channelised from the Food Corporation of India (FCI) and free import must be allowed.”

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With India’s domestic consumption alarmingly outpacing production, the second-largest producer in the world might have to start knocking international doors.

Although the government has pegged this year’s production at around 72 mn tonnes, market estimates put the figure at 66 mn tonnes.

Joseph Massey, Deputy MD, MCX, says, “Usually the government releases estimates based on the arrival in the imandis and the report of procurement agencies. So the estimated shortfall does not reflect the holding at farmer level due to the availability of futures prices and also partly due to possible direct buying by captive users.’’

Production figures in the individual producing states only echo the threat. Punjab, the top producer, has seen a fall of 15 per cent, followed by Haryana at the same levels. Uttar Pradesh’s dip stands at 10-20 per cent with Madhya Pradesh maintaining it steady at 5 per cent. But the worst report card is held by Rajasthan — a steep fall of 40 per cent.

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The production fall has been triggered primarily by erratic weather conditions. Unsuitable temperatures and unseasonal rains have rendered the quality of the produce inferior. The resultant fall in the kernel weight has caused a loss of 2 million tonnes. Trade circles are also rife with speculation over the alleged stocking of wheat by big corporations, resulting in unusual price distortions. “We are witnessing the gradual phasing out of private traders. By the start of next year, only the big corporations will be left in the market,” says Devendra Vora, a trader.

But NCDEX officials said farmers are benefitting, as they are not in a hurry to sell their harvest. ‘‘Soon we may get to a stage when the FCI is not necessary,’’ officials said.

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