Delhi move helps drop in prices of wheat

Wheat prices in India have dropped nearly 13 per cent from record highs since the government offer last week of 3 million tonnes to bulk consumers such as flour millers.

The federal government on Wednesday allowed flour millers to buy up to 3 million tonnes of wheat from state reserves. Yesterday, wheat prices in New Delhi dropped to Rs28,290 ($347.11) a tonne, down 13 per cent from their record high hit last week because stocks are low. But domestic prices are still higher than the state-set support price of Rs21,250.

The price spike reflects a big drop last year in state purchases of wheat.

Every year the government-backed Food Corporation of India (FCI) buys millions of tonnes of wheat at a fixed support price to build the reserves needed to run the world’s biggest food welfare programme.

Staying above the rate

Last year, FCI’s purchases of wheat fell by 53 per cent to 18.8 million tonnes, as open market prices stayed above the rate at which the government buys the staple from domestic farmers.

“We do not want FCI’s procurement to drop this year and that is why we have released 3 million tonnes of wheat,” said a government source.

A jump in India’s wheat exports following Russia’s attack of Ukraine pushed up local wheat prices, prompting India to order a ban on exports in May, but that failed to halt domestic price rises.

“The release of government stocks will help in easing shortages, but the stocks should have been released in December,” said a Mumbaibased dealer with a global trade house.

“The government delayed the release of wheat and allowed prices to rise above the psychological level of Rs30,000.”