*****Wheat shock – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/opinion/editorial/wheat-shock/article65378826.ece

Amritsar: A farmer uses a combine harvester in a wheat field in Amritsar, Tuesday, April 19, 2022. According to the initial results of the Crop Cutting Experiments (CCEs) conducted by the Punjab Agriculture Department, Punjab’s per hectare yield is estimated to have gone down around 5-10 per cent down on last year's yield. (PTI Photo)(PTI04_19_2022_000156A)

Amritsar: A farmer uses a combine harvester in a wheat field in Amritsar, Tuesday, April 19, 2022. According to the initial results of the Crop Cutting Experiments (CCEs) conducted by the Punjab Agriculture Department, Punjab’s per hectare yield is estimated to have gone down around 5-10 per cent down on last year’s yield. (PTI Photo)(PTI04_19_2022_000156A) | Photo Credit: –

The expected drop in wheat procurement needs to be carefully managed; curbs on export and stocks should be avoided

India has been gripped by a wheat shock, soon after announcing that it can plug some of the gap in supplies in the world market caused by the exit of Ukraine and Russia. India’s wheat crop, according to a report in this newspaper, could be 10-20 million tonnes (mt) below this year’s initial estimate of 111 mt — owing to the early onset of a harsh summer. But the bigger cause for concern is the disproportionate drop in procurement this rabi marketing season. At the latest count, it is about 16 mt, 44 per cent down from the same period last year, with wheat procurement about to come to an end later this month. About 43 mt of wheat was procured in the rabi marketing season for 2021-22. The current dip, even if one assumes a slight pick-up in the remaining days if the government relaxes qualifying conditions, has repercussions for food distribution under National Food Security Act and the PM Garib Kalyan Yojana. Wheat stocks as on April 1 amounted to 19 mt, whereas a requirement of about 30 million tonnes of wheat was estimated for these two schemes — 21 million tonnes for NFSA and another 10 million tonnes for PMGKAY. Buffer and strategic reserves for wheat would account for another 7.5 mt. Thus, as against the total wheat requirement of 40 million tonnes, the post-procurement stocks could be in the region of 35 million tonnes this year. It is just as well that the Centre on Tuesday announced additional distribution of rice under PMGKY to the extent of the 5 mt wheat shortfall. Rice supplies under PMGKAY may increase to 18 million tonnes. This is a timely move.

This steep shortfall is unlikely to recur; it is a fallout of the extraordinary circumstances that have derailed wheat procurement this season. Since procurement generally works out to a third or more of wheat output, a drop of about six million tonnes owing to lower output would have been no cause for surprise. But the global wheat shortage triggered by the Russia-Ukraine war has changed everything. With India eyeing exports, farmers are holding back stocks in the expectation of a much higher return than the MSP of ₹2,015 per quintal. Indeed, current prices are ruling at ₹200 or more per quintal over MSP, the rate at which private players are buying stocks. There can be no grudging the extra returns being made by the farmers. Nor can one take a moralistic view of traders who are merely responding to market forces. The government agencies have been slow to respond to the situation.

The Centre should desist from imposing export controls or stock limits, as that would dent the confidence of farmers and intermediaries. It would also go against its espousal of the scrapped farm laws, which were about opening up grain markets and relaxing stock limits. That said, premature policy signals to boost exports of staples need not be sent out. Bountiful monsoons in recent years have ensured that rice stocks (excluding unmilled paddy) are about 32 mt now, about two-and-a-half times the buffer norm for April. There is scope to raise the rice component in PDS this year. The buffer norm of 21 million tonnes for wheat and rice on April 1, should be re-examined in view of rising welfare requirements.

Published on May 03, 2022

wheat (commodity)

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