Better prices lure farmers to hold back wheat stock

Despite rising wheat prices, farmers in Gujarat have slowed down the supply to mandis in anticipation of better returns. With multinational companies and corporate retailers camping in the state, farmers expect the prices to rise further.

"Last year, an average arrival of 45,000 bags of 100 kg each was registered across the market yards of Saurashtra and Kutch regions. Last year, the average price was around Rs 810 a quintal, far lesser than the current price of around Rs 965 a quintal, which is Rs 115 more than the minimum support price (MSP) of Rs 850 a quintal declared by the government this year. However, despite the high prices, market yards are seeing a lower supply of wheat at around 22,000 bags," said Suresh Chandarana, a local wheat trader.

"Farmers have held back their stock and anticipate the prices to touch Rs 1,050 a quintal, with multinational companies and corporate retail companies on the prowl to procure aggressively without hesitating to pay higher prices," said Dinesh Tanna of Tirupati Brokers, a Rajkot-based wheat trading company.

Gujarat is set for a record wheat output this year estimated at around 30 lakh tonne on an acreage of 12 lakh hectare. The estimated crop production is higher than 25 lakh tonne recorded in 2006. The state had registered a wheat output of 20.37 lakh tonne in 2004 and 18.06 lakh tonne in 2005.

"However, the arrivals in the mandis are not in tune with the rise in production," said Jitendra Bhateliya, a local wheat trader.

The low arrivals have hit Rajkot-based traders, as they are not able to meet the rising demand for the crop in south India. "Wheat prices in south India are around Rs 1,150 a quintal, as the crop from Saurashtra and Kutch has not yet hit the southern markets. With prices here at Rs 965 a quintal, we could profit by selling wheat in south India, where the prices are at least Rs 185 a quintal more at Rs 1,150 a quintal. But the low stock here has prevented us from taking advantage of the difference in prices," lamented Tanna.

The Rajkot Market Yard General Merchants Association had demanded 60 to 70 block rakes from the railway ministry to transport wheat to the south Indian markets. However, low arrivals in the markets had made it difficult for traders to fulfil their business commitments, said Tanna.

The equations were now changing. Initially, traders used to dictate terms, but now it was the farmers who were dictating terms in the trade, added Tanna.

Multinational companies and corporate retailers such as the Australian Wheat Board, Kargill, Glencore, Olum Exports, Indian Tobacco Company, among others are camping in the state. But, they too have not been able to procure enough following the state's Stock Control Act. With rising demand and lower supply, farmers expect the prices to shoot up further.

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Gujarat is set for a record wheat output this year estimated at around 30 lakh tonne on an acreage of 12 lakh hectare

The estimated crop production is higher than 25 lakh tonne recorded in 2006

Currently, prices are hovering around Rs 965 a quintal, Rs 115 more than the MSP of Rs 850