india wheat stock drops to 7-year low following record state sale


Published on: March 12, 2024.

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Indian Wheat Inventories at Lowest Level Since 2017

Indian wheat inventories held in government warehouses have dropped to the lowest level since 2017 as a result of two years of low crops. This has prompted the state to sell record volumes in an effort to boost domestic supplies and lower local prices.

According to the state-run Food Corporation of India, wheat reserves in state stores totaled 9.7 million tons at the beginning of this month, down from 11.7 million tons in March 2022.

Government’s Approach to Addressing Tight Supply

Despite the tight supply, the government has chosen not to encourage imports by cutting or removing the current 40% tax, or by directly buying from top suppliers like Russia. Instead, the government has been selling wheat from state reserves to bulk consumers, such as flour millers and biscuit-makers. The aim is to curb domestic prices that have been consistently higher than the state-fixed minimum buying price since the last crop was harvested.

In June 2023, the government commenced selling wheat to private players and has already sold more than 9 million tons by the end of last month, setting a record high, according to a senior government official.

Challenges Faced in Wheat Production

Lower wheat output in 2022 and 2023 has hindered the recovery of inventories at state warehouses. India banned wheat exports in 2022 due to a surge in temperatures that resulted in lower output. This ban failed to prevent prices from rising, and trade and industry officials claimed that last year’s crop was lower than the government’s estimates of a record 110.6 million tons.

In addition, the government’s wheat procurement from local farmers in 2022 fell short of the target. Only 26.2 million tons of wheat were bought from farmers, compared to the target of 34.15 million tons.

Strategies for Replenishing Stocks

To replenish stocks, the government can increase procurement from farmers or allow imports. Some states have already offered bonuses for wheat purchases. A trader in New Delhi suggested these strategies and noted that it is possible for the government to implement them.

Overall, the declining wheat inventories in India’s government warehouses, coupled with low crops in recent years, have necessitated record sales and efforts to stabilize domestic prices. The government’s actions moving forward will impact the supply and pricing dynamics of wheat in India.

Source: Zawya