Wheat prices fall below MSP

Wheat, which has been at the centre of various controversies for the past two years, is now selling below the minimum support price (MSP) in grain mandis of top producing states of Punjab, Haryana and Uttar Pradesh. This has happened after a gap of three years.

Flour millers as well as commission agents at mandis like Khanna and Sangrur in Punjab confirmed that the price of the commodity being sold by farmers at the mandis is in the range of Rs 950-970 a quintal against the MSP of Rs 1,000.

Traders as well as millers, who purchased wheat at Rs 1,010-1,020 a quintal in around April-May, say the cost of the commodity they purchased is now about Rs 1,150-1,160, while it is now available at around Rs 1,070 (including mandi charges, handling cost, etc).

The government should allow export of wheat products so that the industry as well as the farmer is benefited, said DC Singla, director of Arti Flour Mills at Khanna, Asia’s largest grain mandi.

Daily wheat arrival at Khanna mandi is in the range of 40-50 tonnes. Singla added the farmers were holding the commodity anticipating a better price towards the end of the year. However, instead of firming up, prices are on a decline.

A dip in procurement and costly imports had forced the government to impose an export ban on wheat in February 2007 and on wheat products later. It also halted futures trading of the grain. Corporate buyers like ITC, Adani and Britannia were also asked to declare the quantities they had bought, which prompted them to restrict their purchase.

In 2006 and 2007, the government had to import wheat at high prices as domestic procurement was not sufficient to meet the demand from public distribution system. While in 2006, it imported 5.5 million tonnes (mt) wheat at an average cost of $205 a tonne, the average price for the 1.3 mt wheat contracted in 2007 shot up drastically to $365 a tonne.

“The fall in prices below the MSP shows that enough wheat is available in the open market and the apprehension that a record purchase by the Food Corporation of India would drive prices has been proved wrong,” said Alok Sinha, chairman and managing director of the corporation.

Driven by a handsome MSP, wheat output in the current year touched a record high of 78.40 mt and government procurement too hit an all-time high of 22.5 mt.