Indian wheat prices hit record high due to strong demand, supply crunch

The record prices are likely to lift retail inflation that surged to a 14-month high in October, driven by a jump in vegetable prices and dashing hopes of an interest rate cut by the RBI next month

Indian wheat prices have jumped to a record high due to strong demand, limited supplies, and a delay in the government releasing stocks from its warehouses to augment supplies, industry officials said on Tuesday.

The record prices are likely to lift retail inflation that surged to a 14-month high in October, driven by a jump in vegetable prices and dashing hopes of an interest rate cut by the central bank next month.

Supplies are limited in the market, and stockists are unwilling to release wheat at lower prices, said Pramod Kumar, a flour miller.

"If the government begins releasing stocks, supplies will improve, and prices will decrease, as they did last year."

In September, New Delhi lowered the limit on wheat stocks that traders and millers can hold to help boost the grain's availability and moderate prices.

But the curbs failed to bring down prices, which were trading around 30,000 rupees ($355.64) per metric ton in Indore in central state of Madhya Pradesh, up from 24,500 rupees in April and far above the government fixed minimum support price of 22,750 rupees for last season's crop.

Traders anticipate that prices will rise further as the new season's crop is not expected to reach the market until March, said a Mumbai-based dealer with a global trade house.

"Bulk buyers are feeling the squeeze, as they need to buy to keep their operations running. The government needs to start releasing stocks immediately, or prices will rise further," he said.

India initially planned to sell wheat from its state reserves to bulk consumers from July, but this was delayed and there has been no subsequent update on its plans.

Last year the government started selling wheat from its reserves in June, and between then and March 2024 it sold a record almost 10 million tons from stocks.

That helped bulk buyers such as flour millers and biscuit makers to secure supplies at affordable costs.

"The government is also holding lower stocks than usual, which is why it is delaying sales," said the dealer.

Wheat stocks in state warehouses were 22.3 million tons at the start of November, slightly higher than the last year's 21.9 million tons, but far below five-year average of 32.5 million.