Wheat procurement may fall to six-year low

Food Corporation of India (FCI) is likely to miss its wheat procurement target of 31 million tonnes (mt) by about 15 per cent and end up with about 25 mt, a six-year low. As of May 4, wheat procurement by FCI and other government agencies stood at 22.6 mt, against 22.5 in the year-ago period. FCI has already extended the deadline for procurement from April 30 to May 15.

With procurement in the major procuring states of Punjab, Haryana, Madhya Pradesh and Rajasthan at its fag end, it has been estimated total wheat procurement this year will be 24-25 mt. Earlier, it was projected the procurement would stand at 38.1 mt; this was scaled down to 31 mt at a meeting of food secretaries on March 17. Last year, wheat procurement stood at 25.04 mt.

This year, procurement has been hit by crop damage and lower yields in Madhya Pradesh and aggressive buying by millers and private traders in Uttar Pradesh. The initial procurement estimate for Madhya Pradesh was 11 mt; this was subsequently scaled down to eight mt. FCI sources say actual procurement in Madhya Pradesh might stand at 6.5 mt, of which 53.3 mt has already been procured.

Another factor that hit wheat procurement was the significant presence of private buyers. Of the overall arrivals of 27.2 mt, 22.6 mt were procured, indicating 4.6 mt were bought by private entities; in the year-ago period, this stood at 2.4 mt.

Also, this year saw significant hoarding by farmers. Expecting a surge in prices and anticipating an impact of the El Niño weather phenomenon on agricultural commodities in the coming months, they have diverted substantial quantities of wheat to private granaries.

This year, Uttar Pradesh has been the frontrunner, in terms of private procurement. FCI officials confirmed procurement in the state had seen a sharp fall this year.

Madhya Pradesh and Rajasthan are offering a bonus of Rs 150 a quintal to farmers for wheat procurement. After seeing a severe supply crunch in the second half of this season (October-March), millers are on a buying spree this year.

Last year, traders had resorted to profit-booking and the Centre had allowed private exports of wheat. These factors, it is assumed, have also contributed to the rise in private buying this year.

Indu Sharma, director of Wheat Research Institute, Karnal, said by and large, overall wheat production was on expected lines. Diversion of wheat towards private buyers and hoarding by farmers might have led to the lower procurement, she added. In the open market in Uttar Pradesh, farmers are recording prices close to the minimum support price of Rs 1,400 a quintal, owing to better demand.

Uttar Pradesh produces about 30 mt of wheat, the most in India, but contributes only 200,000-400,000 tonnes to the central pool.