India is encountering challenges in replenishing its wheat stocks, with purchases down approximately 25% compared to last year’s levels, primarily due to untimely rains and higher open market prices, which have incentivized farmers to sell to private traders.
The country’s wheat inventories have declined to their lowest levels in 16 years following two consecutive years of reduced crop yields, prompting New Delhi to release record volumes from its stocks to bolster domestic supplies and mitigate local prices.
If India, the world’s second-largest wheat producer, fails to rebuild stocks as anticipated, its capacity to intervene in the market to stabilize prices may be constrained, potentially leading to the country’s first wheat imports since 2017.
State-run agencies have procured 11.92 million metric tons of wheat from farmers thus far this season, marking a 25% decrease from the 15.92 million tons purchased during the same period a year ago, according to data from the Food Corporation of India (FCI).
Untimely rainfall in northern states, particularly in Punjab, has resulted in delayed purchases, as mentioned by an unnamed government official. The official explained, “Harvested crops have higher moisture content, forcing farmers to wait for them to dry before selling to the government.”
Wheat procurement from Punjab has seen a significant decline, with state-run agencies acquiring 3.5 million tons, representing a 49% decrease from the previous year, as indicated by the data.
The prevailing open market wheat prices, exceeding 2,400 rupees ($28.81) per 100 kg, surpass the government’s fixed minimum buying price of 2,275 rupees. Consequently, farmers are exhibiting a preference for retaining their stocks in anticipation of higher prices later in the season.
The active participation of private players in the market, along with the depletion of stocks among flour mills and bulk buyers before the new season, indicates that the government may struggle to achieve its procurement target of 30-32 million tons, potentially necessitating imports, according to a Mumbai-based trader.
The evolving situation underscores the significant challenges faced by India in replenishing its wheat stocks and ensuring sufficient domestic supply.