India's wheat procurement gained pace in the last week of April after a sluggish start to the month as untimely rainfall delayed harvest operations in key wheat producing states, officials at the Food Corporation of India told S&P Global Commodity Insights.
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Register NowThe agency has procured 19.6 million mt of wheat so far in marketing year 2024-25 (April-March), including 9.3 million mt in Punjab, 6 million mt in Haryana and 3.5 million mt in Madhya Pradesh. However, the procurement was relatively lower in Uttar Pradesh and Rajasthan with volumes respectively of around 560,000 mt and 400,000 mt as of April 30.
Procurement operations usually wrap up in Punjab, Haryana and Madhya Pradesh in May, while in Uttar Pradesh and Rajasthan purchases continue until June.
The government plans to aggressively purchase wheat to replenish its stocks at state-run warehouses on the back of slightly higher production, the officials said. The government aims to procure about 33.5 million mt wheat produced in MY 2024-25, nearly 28% higher than 26.2 million mt a year earlier.
However, the overall procurement could be marginally lower than the target in the 31 million-32 million mt range, according to the officials.
"The overall procurement is likely to be lower than the target as spot prices across major producing states are higher than the MSP (minimum support price) assured by the government," a senior official said. The Indian government has announced the support price for wheat at Rupee 22,750/mt ($272.5) for MY 2024-25, according to the agriculture ministry.
The government has pegged India's wheat output in crop year 2023-24 (July-June) at 112 million mt, slightly higher than the harvested 110.55 million mt in the previous season. However, an S&P Global Commodity Insights survey of 13 analysts and traders found that India's wheat harvest in crop year 2023-24 could be in the 107 million-108 million mt range.
Welfare scheme requirement
India has so far met its requirement to supply 18.6 million mt free food grains in MY 2024-25 under the Pradhan Mantri Garib Kalyan Anna Yojana and will need to continue purchasing the crop to replenish wheat stocks in its warehouses, the officials said.
The government had also extended the distribution of free food grains to over 810 million beneficiaries under the scheme for five years effective Jan. 1, 2024. The move was aimed at ensuring food security to the beneficiaries. The scheme, which was set to end in December 2024, was extended ahead of the general election.
India's wheat stocks depleted to a 16-year low of 7.5 million mt at the start of April, declining from 8.4 million mt a year earlier.
Wheat stocks in government warehouses fell rapidly as it sold record quantities to augment domestic supplies and rein in rising prices amid poor crop yields during two previous seasons.
According to the officials, the procurement is likely to reach 13 million mt in Punjab and nearly 7 million mt in Haryana in May. However, the overall volume may fall short of the 8 million mt target for the year in Madhya Pradesh due to higher purchases by private traders.
Spot wheat prices have risen sharply, surpassing the MSP over the past few weeks, traders said. In Indore, Madhya Pradesh, a key spot market, wheat was sold at Rupee 24,600/mt on April 30, more than 8% higher on the month.
"Higher spot prices in some states are likely to discourage farmers from selling their produce to the government and go for better return," another official said.
Traders expect the government to extend its export restrictions on wheat until March 2025. India banned wheat exports in May 2022, after domestic supplies tightened due to a drop in output. In MY 2022-23, India had planned to export nearly 10 million mt of wheat but ended up shipping nearly 5 million mt.