Taking stock

Low wheat stocks manageable; paddy surplus a concern

There is no cause for panic over the fact that wheat stocks with the Food Corporation of India, at 9.7 million tonnes (MT) earlier this month, are at a seven-year low (9.4 MT in March 2017). They are set to improve sharply after the next few months. This is because north India has had a good winter, which has lifted the prospects of the wheat crop. An output of at least 112 MT, a record, is expected, with the Food Corporation of India likely to procure well above 30 MT.

A procurement level of over 30 MT provides the government with the comfort to conduct market intervention operations if required, besides meeting its commitments under National Food Security Act. It was precisely this comfort level that was missing for perhaps more than a year. A wheat stock level of 11.7 MT in March 2023, well below the average of 25 MT over the preceding four years during the month of March, could have led to market actors driving up prices this fiscal. The low stock situation came about because only 18.8 MT was procured in 202223, against an average of 36 MT procured in the five preceding marketing years. It is also known that the Centre needs 25 MT of wheat for its NFSA obligations. As prices rose through 2023, the Centre pushed 10 MT into the market, which brought down its stocks to the current levels. Seven years back, it was a similar story, as procurement dipped. Since then FCI has been trying to procure well over 30 MT since (excluding 18.8 MT in 202223).

The FCI is expected to procure 21 MT from Punjab and Haryana this time. While procurement in Madhya Pradesh is underway, Uttar Pradesh, Rajasthan and Bihar pose challenges owing to poor mandi infrastructure and delayed payments. It is believed that the FCI is on a drive to address these issues. Meanwhile, the Centre has raised the minimum support price for wheat by 7 per cent to ₹2,275 per quintal, not least because of firm global prices. Wheat prices have been disconcertingly firm since the onset of the Ukraine war in February 2022. Unless the buffer situation reaches the trend level and global prices cool off, any lifting of a ban on wheat exports can be ruled out. Cereals inflation at 7.6 per cent is way above the comfort level, even if it is less than the 13 per cent that prevailed in this period last year. Things could cool off, at least on the wheat front.

This brings up the issue of diversification of procurement in terms of crops and geographies. While wheat procurement is expected to stabilise at 3035 MT over time, rice procurement is on the rise. The latter, at 5860 MT, has nearly doubled over 201314 levels, whereas wheat procurement has risen from 25 MT in 201314 to an average of 36 MT in recent years, ignoring the aberration of the last marketing season. The task of making rainfed paddy farmers diversify into millets assumes significance across States. The hyphenation of wheat and rice is perhaps overdone.