Global Rice News

India’s wheat inventories at state warehouses have hit a seven-year low, standing at 19 million metric tons, according to two government sources. This decline is a result of two years of falling production, which has forced state-run agencies to sell more grain to private players. Last year, India banned wheat exports after output declined due to a heat wave. This led to an increase in global prices following Russia’s invasion of Ukraine.

While wheat prices in the US have dropped by over 35% in 2023, prices in India have risen by more than 20% in recent months, despite the export ban. Trade and industry officials attribute this to lower domestic wheat output. The farm ministry had estimated a record production of 112.74 million metric tons, but this year’s output is at least 10% less. The government has only bought 26.2 million metric tons from local farmers, compared to its target of 34.15 million tons.

Despite the tight supply, the Indian government has not taken steps to facilitate imports or reduce taxes. Instead, it has sold wheat from state reserves to bulk consumers like flour millers and biscuit makers in order to stabilize domestic prices. The government maintains that it still has sufficient stocks to prevent a sharp rise in prices and can sell more wheat if necessary.

According to traders, farmers have already sold their stocks and inventories at flour mills have depleted. This will eventually force the government to sell more stocks to stabilize prices. It is predicted that stocks could fall below 6 million tons at the start of the new marketing year on April 1, compared to the usual buffer of 7.46 million tons.

To address this situation, the government will need to initiate imports to secure enough stocks for market intervention. The current correction in global prices presents a favorable opportunity for purchasing wheat. Farmers in India are currently planting wheat, with the harvest set to begin in March. However, planting is lower than last year due to dry weather conditions that have depleted soil moisture and lowered water levels at reservoirs. Additionally, there is a concern over abnormal temperature rises during harvest time that could negatively impact the crop.

Overall, India’s wheat inventories are at a critical low, necessitating measures to stabilize prices and secure enough stocks for the upcoming marketing year. If the situation continues to worsen, the government may need to reconsider its stance on imports and taxes. With the new planting season underway, the hope is that higher prices will incentivize farmers to plant more wheat, but this may be hindered by unfavorable weather conditions.