India’s wheat inventories at state warehouses have dropped to 19 million metric tons, the lowest in seven years, two government sources said on Friday, as two years of falling production forced state-run agencies to sell more grain to private players.
Last year, India, the world’s second-biggest wheat producer, banned exports after output was curtailed due to a heat wave and overseas sales picked up as Russia’s invasion of Ukraine sent global prices to multi-year highs.
While US wheat prices have corrected more than 35 per cent so far in 2023, prices in India have leapt more than 20 per cent in the past few months, despite the ban.
That, according to trade and industry officials, is because this year’s domestic wheat output is at least 10 per cent less than the farm ministry’s estimate of record production of 112.74 million metric tons.
Another indicator of low output is that the government has bought only 26.2 million metric tons of wheat from local farmers this year, compared with its target of 34.15 million tons.
But, despite the tight supply, the government has resisted calls to facilitate imports by either lowering or abolishing the current 40 per cent tax or by directly buying from top suppliers such as Russia.
Instead, it has dipped into state reserves to sell wheat to bulk consumers, such as flour millers and biscuit makers, to cool domestic prices.
“Stocks are lower, but the government still has sufficient stocks to ensure that prices do not rise sharply. The government can still offload more wheat in the market if there’s a requirement,” said one of the sources.
(REUTERS)
