Wheat prices fall below MSP of Rs 1,735 on fresh arrivals and weak quality

Wheat prices have fallen below the minimum support price of Rs 1,735. Prices started falling from the second half of March as new crop started arriving from Madhya Pradesh, Rajasthan and Gujarat, aong other states. Early crop was damaged due to late-season hailstorms a month ago and small farmers has also started selling in market without waiting for procurement. In last two weeks, prices in producing mandis have fallen 6-8 per cent on average.

It may be pertinent to note that oilseeds, pulses and even cotton in some areas are trading below their MSP, and wheat, the largest crop after paddy, has joined the list.

The quality of wheat from MP is usually better than that from North India, and the state government in that state has announced a bonus of Rs 265 per quintal above MSP.

At present average-quality wheat in the Saurashtra markets is priced at Rs 1,550 per quintal, while in the MP and Maharashtra mandis it is selling ar around Rs 1,650.

Prerana Desai, research head, Edelweiss Agri Services and Credit, said, “Prices have fallen below MSP due to high moisture content in wheat that are arriving. The poor quality is because of hailstorm ahead of harvesting in many areas. We assume Wheat crop to be lower by around 8-10% compared to last year. Last year was a record wheat crop at 98.5 million tons as per government estimates (Edelweiss estimate is 98 million tons for last year). Currently crop is in the fields, exact crop size will be become clear once the harvest is complete without any weather problem.”

She, however, believes that wheat prices might not sustain below MSP once arrivals drop below expectations. In North mandis like Punjab, Haryana which are largest producers followed by UP, arrivals are expected to start in ten days’ time. However there too traders fear some crop damage due to heat in past two weeks. However, extent of damage could be known later.

Devendra Vora, director, Friendship Traders, said, “so long as low quality or damaged crop continuous to arrive prices are unlikely to enter bullish zone.”

Despite lower prices, buying from flour millers is not supportive. Ajay Goyal, MD, Shivaji Flour mills said that, “one of the reason for prices below MSP is because government procurement machinery in states in western Maharashtra is not that efficient, nor there are enough centers.” However, flour mills, specially flour mills don’t have liquidity to stock but big traders, especially corporate traders may be stocking wheat. “Smaller flour mills have been hand to mouth since last few years as government policies and difficulties in credit facilities,” said Goyal.

The Food Corporation of India has fixed a target of procuring 32 million tonne (MT) for 2018-19 marketing year starting April, as against 30.82 MT purchased by state-owned FCI during 2017-18. Out of the total wheat procurement target for 2018-19 marketing year, Punjab aims to procure maximum at 11.9 MT, followed by Haryana 7.4 MT, Madhya Pradesh 6.7 MT, Uttar Pradesh 4 MT, Rajasthan 1.6 MT, Bihar 2 MT and Uttarakhand 1 MT.