On Tuesday, Indian wheat prices reached an eight-month peak, driven by robust demand during significant festivals, restricted availability, and import duties rendering foreign purchases impractical for domestic flour mills.
The escalating prices might lead the government to release additional stocks from its inventories and waive import duties on wheat to strengthen the supply and manage prices in anticipation of crucial state assembly elections and a general election next year. The surge in wheat prices has the potential to contribute to food inflation.
On Tuesday, wheat prices in New Delhi experienced a 1.6% increase, reaching 27,390 rupees ($329) per metric ton—marking the highest level since February 10. Over the last six months, prices have witnessed a substantial surge of almost 22%.
“Festival season demand is driving up wheat prices. The government needs to permit duty-free imports to reduce prices,” said Pramod Kumar S, president of the Roller Flour Millers’ Federation.
Last month, Sanjeev Chopra, the highest-ranking civil servant at the food ministry, stated that India does not currently have any intentions to eliminate the 40% import tax on wheat.
On October 1, the wheat reserves in government storage facilities amounted to 24 million metric tons, significantly lower when compared to the five-year average of 37.6 million tons.
Ashwini Bansod, who leads commodities research at Phillip Capital India Pvt Ltd, explained that the increase in domestic wheat prices is due to the absence of imports and government procurement falling short of the intended targets.
In 2023, India succeeded in acquiring 26.2 million tons of wheat from farmers, falling short of the intended goal of 34.15 million tons.
The market is also taking into consideration worries about the El Nino weather pattern, which could result in above-average winter temperatures and potentially adversely affect the upcoming wheat crop, as noted by Bansod.
While the government projected a record-high wheat output of 112.74 million metric tons in 2023, a prominent trade association contended that the actual harvest was at least 10% lower than the farm ministry’s assessment.
“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,” said a Mumbai-based dealer with a global trade house.
