Price dip hope heaps FCI with wheat

NEW DELHI: Though the government appears to be in panic mode over grains, the atta and bread manufacturers of India are relaxed. In its latest tender, FCI is offering wheat to millers across the country at less than Rs 10 per kg. But it has yet to find any takers because processors are sure wheat prices will fall sharply within a few weeks.

The FCI has put on sale 3.65 lakh tonnes wheat under its open market scheme last week, priced at Rs 9.86 per kg. However, it has yet to find a queue in front of its godowns because spot market prices are already dropping rapidly. FCI’s previous tender, priced at Rs 12.32 per kg, came a cropper because it was much more expensive than wheat available with traders.

“The fact that there are no buyers at even Rs 9.86 per kg is a good signal. It shows that the market is awaiting a plentiful harvest and there are ample supplies already available to keep millers in business for the next few weeks,” said a senior government official.

Some quantities of imported wheat are also lying at ports because millers are refusing to pick up contracted grain now that prices have dropped.

But while falling wheat prices is welcome news for both the government and processors, it is driving away farmers from mandis. Take Gujarat. When mandi prices were Rs 9.15 per kg, the state was seeing daily arrivals of 15,000 bags. Now that price has dropped to Rs 8.75 per kg, arrivals are 2,000 bags, even though it is still well above the MSP.

Actually, the biggest risk this year is that if mandi prices slip below farmer expectation, individual growers may simply hold on to stocks beyond the traditional harvest months. But the government will have no control over this scenario.

India has about 13 million small wheat farmers. With an average yield of 2.6 tonnes per hectares, they are each producing less than four tonnes wheat every year. Out of this, one tonne is usually retained by the average small farmer for self-consumption.

“When you have to sell just three tonnes wheat, it is quite easy to sell it a tonne at a time when prices are better. That is exactly what happened in 2005, when farmers and village traders in Rajasthan finally emptied their wheat godowns just before Diwali. So, while there is a good harvest coming up, it may be naive to expect farmers to sell it at a loss or at distress prices in all states. Unfortunately, the government has scared away private players and is itself unlikely to offer a significant bonus. Stocking by farmers is thus a serious possibility this year,” said a market watcher.