GRAINY PICTURE

Several questions arise from the recent trend of wheat prices

- SANJEEB MUKHERJEE

A few weeks back, wheat prices in Delhi's markets soared to ₹3,360 a quintal. The jump came despite the Centre pumping in large quantities of wheat through the open market sale scheme (OMSS) of the Food Corporation of India. The government recently said it was keeping a close watch on wheat prices while world markets were seen to be under pressure due to an oversupply.

In 2023-24 (FY24), the government pumped in 10 million tonnes of wheat from its inventories to cool prices. However, in November last year, only around 2.5 million tonnes was allocated for open sales, of which 900,000 tonnes have already been pumped into the market and 860,000 tonnes have been lifted at auctions, so far showing only a limited impact on prices. Trade sources say that since the first tender for open sales issued in November to the last one issued a few days back, wheat prices in the open markets have risen by ₹150 a quintal in the Delhi market.

"The prices, instead of coming down, have risen," said a large trader based in Delhi. The primary reason for the rise is that the market is hungry for wheat and there are low pipeline stocks with flour millers and biscuit-makers. "There is a lot of speculative activity, too, going on in the wheat markets, keeping prices high," he said.

Talk of speculative activity has gained ground because official estimates put wheat production in the 2023-24 crop, which ended in July, at an all-time high of 113.29 million tonnes, up 2.47 per cent from the previous year. Wheat stocks in state warehouses totalled 18.41 million tonnes at the start of this month - it was 16.35 million tonnes in January last year.

The Centre fixed a reserve price for wheat under OMSS at ₹2,325 a quintal for 'fair and average quality grain' and 2,300 per quintal for 'under reduced specifications grain'. However, traders say the prices fetched at the auctions are much higher than the reserve price, reflecting unsatiated demand.