The Food Corporation of India (FCI) will offload 3 million mt wheat from government inventories to rein in rising domestic prices, a release from the food ministry said on Jan. 25. Domestic wheat prices had risen over 35% to Rupee 31,500/mt ($386.40/mt) due to continued tight supply over the past several months.
“The Food Corporation of India will offload 3 million mt wheat from the Central pool stock to the market through various routes under the Open Market Sale Scheme (Domestic),” the statement said.
India had previously pondered releasing 2 million mt of wheat stocks to the domestic market, S&P Global Commodity Insights reported earlier.
Domestic supply tightened over the past few months as the harvest shrunk due to severe heatwaves and amid higher export demand in the aftermath of the Russia-Ukraine war.
According to the statement, offloading 3 million mt of wheat through the scheme within a span of two months through multiple channels is likely to have an immediate impact on the soaring wheat and flour prices.
As of Jan. 1, FCI had 17.2 million mt wheat in its inventories, against the buffer requirement of 13.8 million mt, according to data released by FCI.
“The government has around 3.4 million mt wheat over the required buffer level which leaves them some room to offload stocks,” an official with the food ministry said.
The government will offer wheat to traders, including flour millers and bulk buyers, through e-auction for a maximum quantity of 3,000 mt per buyer, per auction, the statement said.
The government will also offer wheat at a reduced rate of Rupee 23,500/mt ($288.52/mt) to other government agencies without e-auctioning, the release said.
“The sale under this special scheme will be subject to the stipulation that the buyer will convert wheat to atta (flour) and offer it to public at a maximum retail price of Rupee 29.50 per kg,” the release added.
In the marketing year 2022-23 (April-March), India’s wheat harvest had shrunk 2.5% on year to 106.84 million mt.
India’s wheat exports have been banned since May 13, 2022, as the government sought to curb rising prices.
However, the government is unlikely to reverse the export ban before the fresh crop starts hitting markets in March-April, according to trade sources.
2023 crop outlook
India is expecting a bumper crop harvest in MY 2023-24. As of Jan. 20, wheat acreage was at 34.1 million hectares, against 34 million mt in the previous year, the country’s agriculture ministry data showed.
Market participants expect that a likely increase in output will push India to lift the ban on wheat exports imposed in May 2022.
“So far, the weather has been good for the growth of the crop which is expected to increase the yields,” Vinod Goyal, a trader based in Delhi said Jan. 26.
Wheat crop sees optimum yield under sunny days and cold nights. So far, the weather has been favorable for the wheat crop.
Nonetheless, trade sources are skeptical of large volumes of Indian wheat exports happening this year.
At the same time, market sources believe previous rumors about wheat imports are unlikely to materialize in the next couple of months. “It’s nearly new crop harvest starting in February and March so [there’s] no real point [in allowing wheat imports]. If they need to, maybe they will import later this year,” a Singapore-based grains trader said.
Source: Hellenic Shipping News
