Monday, May 20, 2024

Rabi wheat procurement may surpass 34.1 MT target: FCI chairman

The open market sales scheme (OMSS), under which the Centre sells foodgrain to keep prices down, the continuing export ban and likely higher production in 2022-23 (July-June) will increase wheat supplies, he said.

“This year, we will have more supply due to likely 5 mt more production than last year and as there is a ban imposed on wheat export, we will have additional 7 mt wheat available in the supply chain. This not only signals that there is a chance for the government to procure more wheat than estimated but also indicates that prices will come down once the 3.3 mt wheat offloaded under OMSS arrives in the market. “

However, the quality of wheat is expected to be affected due to unseasonal downpour in March. This may result in higher procurement of the lower grade ‘under reduced specification’ (URS) wheat than the normal ‘fair average quality’ (FAQ) variety. Edited excerpts:

Will procurement be delayed by rainfall in wheat-growing states?

The procurement started in Madhya Pradesh on March 20, and there will be no delay in procurement in other states. Procurement of wheat by FCI will kick off in Punjab, Haryana, Rajasthan and Uttar Pradesh from 1 April as scheduled.

Will recent heavy rainfall and hailstorm in some regions weigh on wheat production?

Production involves both quality and quantity. Quality is definitely going to suffer because of unseasonal rains at the harvesting stage causing lustre loss in wheat. This signals two things. If the quality is poor, the private sector will not purchase wheat at a higher rate. I think quantity will not be affected as the erratic weather recently improved, maturing conditions. In fact, in quantity terms, wheat production is expected to be 112 mt this year, 5mt higher year-on-year as estimated by the agriculture ministry.

Will FCI be able to procure fair quality wheat?

No, procurement of URS variety is seen to be higher. The government will have to provide some relaxations. For relaxation, there is a protocol that we follow. Our crop assessment team will visit the field and check the wheat crop quality. Based on the ground situation and percentage of lustre loss, each state will be given some relaxation. Most areas of Bhopal have received heavy rain. Therefore, the assessment team is currently visiting Madhya Pradesh. We will be sending the team to Punjab once we receive a request from the state.

An uptrend in wheat prices has recently been noticed despite the OMSS operations. What could be the factors?

Prices should not rise, because the impact of OMSS is not yet over. In the supply line of OMSS, wheat is being lifted every day. The fund they have given to me for wheat under OMSS, they haven’t lifted that quantity yet. A total of 3.3 mt is sold, and only 3.2 mt has been lifted so far. The private sector is trying their best to lift the remaining 100,000 tonnes to full capacity. Despite that, they cannot lift the remaining quantity at once due to logistic challenges. To lift 100,000 tonnes, they generally require about 33 days.

OMSS’ impact on prices has just started unravelling. Prices have eased since the first e-auction of OMSS on 1 February, and now those are being traded at 22-23 per kg in mandis. According to me, prices will go down because of two reasons. One reason is the impact of OMSS on the supply chain and the other is higher supply of new season’s wheat in the market.

With likely higher supplies, where do you see prices in the coming days?

As the wheat lifting under OMSS gets over by 31 March, I expect prices to fall further. It could even come below the MSP of 2,125 per quintal.

Will the government be able to accommodate such a large quantity amid quality concerns?

If the government can meet the higher procurement target, a concern over storage will arise. It will end up in a situation like rice. It currently has about 20 mt rice in its stock. And the challenge would be procurement in less time.

The lustre loss in wheat this year may reduce its shelf life to 6 months. This may not encourage private traders to purchase it at higher price as storing poor quality crops involves higher cost. The government, on the other hand, will preserve wheat in steel silos as they do when there is a quality concern amid higher procurement. Steel silos increases shelf life of crops up to three years.

Will wheat prices lcome down below the MSP?

First flush of wheat, which is superior in quality, is already arriving in Madhya Pradesh in small quantities. We will not get it. Private players who make premium products will take that wheat. When the common variety starts hitting the market, supply will be higher. At that time prices will start falling. Harvesting is delayed by a week, and moisture content in fresh wheat is higher than the permissible limit of 12%.

Prices may come down to 21-22 per kg once the entire lifted quantity under OMSS comes to the supply chain around mid-April.

Is the government mulling lifting the ban on wheat exports and resume wheat distribution?

There is no plan to change the wheat distribution scale at present. This is too early to resume distribution of wheat. The government is also unlikely to consider lifting the ban on wheat exports until domestic food security is ensured.

This year, we will have additional 7 mt of wheat, which was exported last year. This indicates, we will have surplus supply of 12 mt domestically against the previous year.

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