Record-high wheat prices may impact government buying

Record-high wheat prices, which are ruling 50% higher than the minimum support price (MSP) of Rs 2,125 per quintal for the ongoing 2022-23 rabi marketing season, pose a challenge for replenishing the depleted government granaries, said traders and industry executives.

New wheat crop will be harvested in two months, gaining pace after Baisakhi (April 14).

The warehouses of the Food Corporation of India (FCI) used to overflow with wheat till the previous year as farmers preferred selling wheat to the FCI at MSP over the open markets, which offered a price lower than the MSP. However, in 2021-22, the FCI's wheat procurement plunged 56% as farmers sold their produce to private traders.


For the FCI to buy enough wheat to ensure food security of the country, in the run-up to the 2024 general election, either the open market prices must decline substantially or the government would have to offer a hefty bonus above the MSP, said industry executives.

"If we do not see any government intervention to cool down the wheat market, it may lower the procurement of wheat by the FCI," said Pramod Kumar S, president, Roller Flour Millers' Federation of India (RFMFI).

On January 1, the FCI held 17.2 mt wheat, against 33 mt a year ago.

The buffer norm for wheat stock on January 1 is 13.8 mt. The last time the FCI's stocks were this low was in 2017, when India had to import 6 mt of wheat.