India faces a wheat crisis with stocks at a seven-year low of 19 million tons, causing a 20% surge in prices despite a global correction. Government resistance to imports sparks concerns as domestic production falls 10% short, pushing traders to anticipate a further dip in stocks below 6 million tons by April 1. Calls for intervention intensify as farmers sell stocks, flour mills deplete inventories, and the government draws from reserves to stabilize prices, emphasizing the critical need for strategic imports during this opportune global price correction.
HIGHLIGHTS:
Lowest Wheat Stocks in Seven Years: India's wheat inventories in state warehouses have hit a seven-year low at 19 million metric tons. This decline is attributed to two years of falling production, compelling government agencies to sell more grain to private players.
Export Ban and Global Price Trends: Last year, India banned wheat exports due to reduced output caused by a heat wave. Global prices surged due to Russia's invasion of Ukraine, but U.S. wheat prices have corrected over 35% in 2023. In contrast, Indian prices have risen over 20% despite the export ban.
Domestic Production Shortfall: Trade and industry officials suggest that this year's domestic wheat output is at least 10% less than the farm ministry's estimated record production of 112.74 million metric tons. The government purchased only 26.2 million metric tons from farmers, falling short of its 34.15 million-ton target.
Government's Response and Market Intervention: Despite calls to facilitate imports by reducing the 40% tax or purchasing from major suppliers like Russia, the government has used state reserves to sell wheat to bulk consumers (e.g., flour millers and biscuit makers) to stabilize prices. The government insists it has sufficient stocks to prevent sharp price increases.
Concerns and Market Dynamics: Farmers have sold their stocks, and flour mills' inventories are depleted, leading to reliance on auctions conducted by the Food Corporation of India. Traders anticipate that this could force the government to sell more stocks to stabilize prices, potentially reducing stocks to below 6 million tons when the new marketing year begins on April 1.
Import Recommendations: A Mumbai-based dealer suggests that the government should initiate wheat imports to secure enough stocks for market intervention. The current correction in global prices is seen as an opportune time for such purchases.
Conclusion
The title encapsulates India's pressing wheat situation, while the summary highlights the dual challenges of low stocks and resistance to imports amid falling domestic production. The looming dip in stocks by April 1 underscores the urgency for government action. Strategic imports during the current global price correction could provide a timely solution, ensuring stability in wheat prices and safeguarding against potential shortages in the coming months