Indian wheat prices reach 8-month peak due to festival demand and limited supply
Published on: October 17, 2023.
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Indian Wheat Prices Surge to Eight-Month High on Strong Festival Demand
New Delhi, India – Indian wheat prices hit an eight-month high on Tuesday due to robust demand during major festivals, limited supplies, and unfeasible overseas purchases caused by import duties on the cereal for domestic flour mills.
The rising prices have raised concerns about food inflation and may prompt the government to release more stocks from inventories and eliminate import duties to stabilize supplies and control prices before crucial state assembly elections and the general election next year.
Wheat prices in New Delhi surged by 1.6% on Tuesday to reach 27,390 rupees ($329) per metric ton, the highest level since February 10. Over the past six months, prices have skyrocketed by nearly 22%.
“The demand during the festival season is driving up wheat prices. The government should allow duty-free imports to bring down prices,” said Pramod Kumar S, president of the Roller Flour Millers’ Federation.
The food ministry’s highest-ranking civil servant, Sanjeev Chopra, stated last month that India currently has no immediate plans to abolish the 40% import tax on wheat.
Government warehouses held only 24 million metric tons of wheat stocks as of October 1, a significant decline compared to the five-year average of 37.6 million tons.
Ashwini Bansod, head of commodities research at Phillip Capital India Pvt Ltd, explained that domestic wheat prices are rising due to the absence of imports and lower-than-targeted procurement by the government.
In 2023, India managed to procure only 26.2 million tons of wheat from farmers against a target of 34.15 million tons.
The market is also factoring in concerns over the El Nino weather pattern, which could result in warmer-than-normal temperatures during winter and negatively impact the upcoming wheat crop, according to Bansod.
The government’s estimate of record-high wheat output at 112.74 million metric tons in 2023 has been disputed by a leading trade body, suggesting that the harvest is at least 10% lower than the farm ministry’s estimate.
“The supply situation is expected to tighten further in the coming months, and there is a real risk of prices surpassing 30,000 rupees unless the government allows imports,” warned a Mumbai-based dealer from a global trade house.
Source: Zawya
