Private traders far more active in wheat procurement

Wheat is being bought at a premium of Rs 25-50 a quintal in MP, UP and Rajasthan, curtailing availability for govt agencies

Aggressive buying by private traders might dent wheat procurement by government agencies in the rabi marketing season. Wheat is being purchased at a premium of Rs 25-50 a quintal over the government's minimum support price (MSP) in Madhya Pradesh, Uttar Pradesh and Rajasthan. In Punjab and Haryana, however, due to an efficient procurement mechanism and the presence of commission agents (who play a pivotal role in procurement and distribution of payment to farmers, all in a short span of four weeks), private trade is conspicuous by its absence.

Sources in the Food Corporation of India say arrivals have been faster over last year and initial procurement has been higher but their average daily procurement has started tapering in the central and western parts.

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The arrivals are speedy this time in Punjab and Haryana due to an early harvest — the temperature is high and farmers who suffered income loss for two seasons because of failure of the cotton crop and low remuneration for paddy are in dire need of funds. An early harvest will ensure early income to meet urgent expenses and repayment of debt.

The FCI executive said, "We might end up buying 26 million tonnes against the estimated target of 30 mt."

The average daily procurement in MP by government agencies this week has been 115,000 tonnes, a third of last years’ average of 400,000 tonnes a day. Sources in the trade confirm 1.4 mt of private purchase in the state till Monday. An FCI executive says private purchase might touch 2.5 mt in the state, which would mean a 33 per cent dip from the government procurement of 7.3 mt last year. "To some extent, low rain is responsible for lower production and lesser procurement here but private buyers have emerged in large numbers this year,” he added.

MP had pipped Haryana from second position last year by procuring 7.3 mt. Haryana procured 6.7 mt and Punjab 10.3 mt in 2015.

Dry weather this year due to scanty rain in winter has meant lower moisture and higher lustre in the grain. Yield has declined in some pockets in rainfed areas but better quality of grain would make up for this. Against a moisture level of 11-12 per cent in the past few years, the content in wheat is eight to nine per cent this year. Golden grain has longer shelf life and less moisture also indicates lesser loss in weight of stock over a period.

Confirming the active participation of private traders, Ravi Golyan, a flour miller from Rajasthan, said there were several factors. Millers last year remained out of direct purchase and then faced a supply shortage. The government's Open Market Sales Scheme is unpredictable. Total production is also less in irrigated areas.  So, it is considered prudent to keep some stock to meet any scarcity after July.

“Wheat is a safe commodity for traders. We burnt our fingers in guar and cotton. Wheat's price remains more or less stable and needs lesser investment as compared to other crops to raise stock of a given size. So, small traders have also joined the league of buyers of wheat this year,” said the trader, who did not wish to be named.Due to its superior quality, the demand for MP wheat is the highest among the traders, he added.

Procurement picked up momentum in Punjab after the announcement of the Reserve Bank granting a cash credit limit of Rs 12,532 crore to the state government for food purchase from the central pool. Procurement so far is much better and likely to end the year at a higher level.