India: Wheat prices hit 8-month high on festival demand amid tight supply

Wheat prices have jumped to an 8-month high on strong demand during the festive season amid limited supplies. The development comes at a time when import duties have made overseas purchasing difficult for domestic flour mills.

The government may need to release more stocks from inventories and remove import duties to ensure ample supplies and price control, especially in preparation for state assembly elections and a general election next year, with the possibility of rising wheat prices contributing to food inflation, added the agency’s report.

In Delhi, wheat prices jumped by 1.6 per cent on Tuesday, reaching Rs 27,390 per metric ton, the highest level since February 10. Over the past six months, prices have surged by nearly 22 per cent.

Pramod Kumar S, President of the Roller Flour Millers’ Federation, told the news agency that festival season demand is propelling the increase in wheat prices and called for the government to allow duty-free imports to mitigate rising costs.

“Festival season demand is driving up wheat prices. The government needs to permit duty-free imports to reduce prices,” he said.

Although India has no immediate plans to eliminate the 40 per cent import tax on wheat, there is growing concern about depleting wheat stocks in government warehouses, which stood at 24 million metric tons as of October 1, significantly below the five-year average of 37.6 million tons.

Ashwini Bansod, Head of Commodities Research at Phillip Capital India Pvt Ltd, noted that domestic wheat prices are rising due to the absence of imports and the government’s failure to meet its procurement targets.

In 2023, India procured 26.2 million tons of wheat from farmers against a target of 34.15 million tons.

Additionally, the market is taking into account concerns regarding the El Nino weather pattern, which could lead to warmer-than-normal winter temperatures and potentially negatively impact the upcoming wheat crop.

While the government estimates record-high wheat output of 112.74 million metric tons in 2023, a leading trade body suggests that the harvest is at least 10 per cent lower than the farm ministry’s estimate.

A Mumbai-based dealer with a global trade house told the news agency that unless the government opens the door to imports, the supply situation may tighten further in the coming months, with a real risk of prices surging beyond Rs 30,000.

“The supply situation is poised to tighten further in the coming months, and there’s a real risk of prices surging beyond 30,000 rupees unless the government opens the door to imports,” the dealer said.

Tags: stocks, duties, demand, festival season, импорт, prices, wheat