The Government of India might as well offer three million tonnes of wheat through the open market sale scheme, according to a BL report.
'Wheat could be offered to mills and other bulk users at Rs 1,170 a quintal in any part of the country, quoting a trade source, the report said. A decision on the open sale and the price is likely to be taken by the Empowered Group of Ministers soon. Flour mills, in particular, could opt to buy wheat from the scheme, though stocks could be from last year's crop. The Union Government will be interested to sell the stocks in view of its warehouses bulging with stocks. As on June 1, 2012 rice and wheat stocks with the Government were 82.41 million tonnes (mt) with wheat accounting for 50.17 mt and rice the rest. This is far higher than the norms set by the Centre for buffer stocks that can be used in the event of any food emergency.
The open sale and exports of wheat to countries such as Bangladesh, the Gulf and Malaysia present an interesting scenario in the wheat markets. The situation could take an interesting turn once the Government ends procurement for buffer stocks. According to trade sources, wheat prices in the open market are likely to rule around the minimum support level (MSP) of Rs 1,275 a quintal even after the procurement ends, the report pointed out. 'At least one mt of wheat have been exports. There are chances for export of an additional one mt,' S Pramod Kumar, Executive Director of Bangalore-based Sunil Agro Foods is quoted as saying by the report.
One of the fears in the market is that wheat prices could decline once the Food Corporation of India (FCI) and agencies nominated by it wind up operations to procure for buffer stocks. Reports from some parts of Haryana say that the agencies have stopped buying wheat from farmers due to lack of storage space. The FCI and other agencies have procured a record of over 35.6 mt wheat this year since April 1, this year against 26.7 mt during the corresponding period last year. Overall, 28.3 mt were procured last year, the report informed. 'Arrivals are negligible. Looks procurement could be wound up in Punjab and Haryana around June 15, 2012'. Kumar said.
Raj Narayan Gupta, a miller in Uttar Pradesh was quoted as saying by the report: 'Arrivals are low in Punjab and Haryana. Some amount of wheat is coming in Bihar and the State Government is procuring it'.
"Currently, supply is only from Uttar Pradesh, Bihar and Rajasthan. With arrivals being low, it is unlikely that wheat prices will drop after procurement ends. Wheat availability in market may be low despite record production. There is no crop now in Gujarat and production in Maharashtra is low", Kumar continued.
Wheat production this year is projected at a record of around 90 mt against 86.7 mt last year. Trade sources said that growers may not be willing to offload their produce at price lower than the MSP, the report said. 'Export window is open. It will cap any fall in price,' Kumar added. The futures market, too, seems to indicate of price fall being capped with contracts from September onwards ruling above Rs 1,200 a quintal. Contracts up to August are, however, ruling below Rs, 1200, the report concluded.