You are here: Home » Economy & Policy » News
Business Standard

The story behind India's missing wheat stock

A cool weather laden with moisture is good for the wheat crop. However, such a climate has been absent this year

Sanjeeb Mukherjee  |  New Delhi 

The story behind India's missing wheat stock

India's wheat market is in a tizzy as supply projections and actual arrivals are not matching, raising a big question mark over the Centre's official production estimate for 2015-16.

The agriculture ministry in its third advance estimate of foodgrain production released earlier this month had estimated wheat output at over 94 million tonnes for the year. This itself was a bit shocking given that India has suffered two back-to-back droughts, which had pulled down the groundwater levels. Besides, the winters in 2015-16 was much less cooler than before.

A cool weather laden with moisture is good for the wheat crop. However, such a climate was not to be found this year. Nonetheless, top officials in the agriculture ministry are still hopeful that in the final analysis, there won't be any drop in production.

In fact, a senior official from the Karnal-based Directorate of Wheat Research discounted any report of shortfall in production on the grounds that arrivals in Punjab and Haryana are more than last year's.

However, the procurement figures compiled by the ministry of food and consumer affairs belied claims of a bumper harvest.

It is already May and wheat procurement in 2016-17 is only 22.8 million tonnes (mt), well below the official target of 28 mt.

The story behind India's missing wheat stock
Considering that the peak wheat procurement season ends in June just a few weeks from now, there is talk that wheat procurement in the 2016-17 season might be 23-24 mt, missing the target by 4-5 mt.

As on May 22, around 25 mt of wheat arrived in all mandis across India, compared to 29 mt in the same period last year.

Given that wheat production in 2014-15, which was marketed in 2015-16, was only 86.5 mt, it is surprising that production this year is estimated to be higher. Daily wheat arrivals in 2016-17 are tapering off compared to those of last year.

The big drop in wheat production so far has been in three states - Uttar Pradesh, Madhya Pradesh and Rajasthan - all of them hit by drought.

Wheat procurement in Madhya Pradesh in 2016-17 till May 20 has dropped by half compared to 2015-16 at 4 mt, while in Uttar Pradesh and Rajasthan, it has fallen 61 per cent and 37 per cent, respectively. The official explanation for this miserable performance particularly in Madhya Pradesh, which has become a frontline wheat producing and procurement state in the past few years, is that massive private buying due to low taxes has impacted state purchases of wheat.

But, traders and industry experts discount this. A senior official with a leading global trading firm pegged private sector purchases at 1.5-2 mt of wheat from the Indian domestic market every year. He said in now way can private players absorb the 4-5 mt shortfall the Centre might be witnessing in procurement this year.

With the international wheat market at multi-year lows owing to a global glut, it is unlikely that private traders would be purchase wheat from India to stock and sell in future.

So where has this bumper harvest gone if it is not showing in government purchases and is not being purchased by private traders?

An explanation for this could be that there is a big mismatch between the Centre's production estimate and the actual crop size. In reality, wheat crop in India this year could be much lower than what has been estimated. The subsequent advance estimates should reflect that.

First Published: Mon, May 23 2016. 00:26 IST
RECOMMENDED FOR YOU