On Tuesday, Indian wheat prices reached an eight-month high, spurred by strong demand for huge holidays, limited supply, and import tariffs, which makes offshore procurement impracticable for local flour mills.
Wheat production in 2023 increased to a record 112.74 million metric tonnes, up from 107.7 million metric tonnes the previous year, according to the Ministry of Agriculture and Farmers Welfare. However, according to a trade group, India’s wheat harvest in 2023 would be at least 10% lower than the government’s prediction. According to the trade group, decreased supplies and rising prices suggested reduced production.
The rising costs may push the government to release additional stocks from storage and reduce import levies on grain in order to boost supply and keep prices under control ahead of critical state assembly elections and a general election next year. Wheat price increases may lead to food inflation.
Wheat prices in New Delhi rose 1.6% to 27,390 rupees ($329) per metric tonne on Tuesday, the highest since February 10. Over the last six months, prices have risen by approximately 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.
According to Sanjeev Chopra, the food ministry’s most senior civil official, India has no imminent intentions to eliminate a 40% import levy on wheat.
Wheat inventories in government warehouses were at 24 million metric tonnes on Oct. 1, a significant decrease from the five-year average of 37.6 million tonnes.
Domestic wheat prices are increasing due to a lack of imports and the government’s less-than-targeted buying, according to Ashwini Bansod, head of commodities research at Phillip Capital India Pvt Ltd.
In 2023, India obtained 26.2 million tonnes of wheat from farmers, compared to a goal of 34.15 million tonnes.
According to Bansod, the market is also taking into account worries about the El Nino weather pattern, which might result in warmer-than-normal temperatures throughout winter and have a detrimental influence on the incoming wheat harvest.
The government expects that wheat production will reach a record 112.74 million metric tonnes in 2023, while a key trade association says the crop will be at least 10% lower.
“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.