Wheat prices in India rose to an eight-month high on Tuesday, propelled by strong demand for big festivals, limited supplies, and as import duty makes overseas buying unfeasible for domestic flour mills, as reported by Reuters. The increasing wheat prices likely to prompt the government to release more stocks from inventories and eliminate import duties on wheat to bolster supplies and control prices ahead of state polls and a general elections next year.
According to the Reuters report, surging wheat prices could contribute to food inflation. Wheat prices jumped by 1.6 per cent on Tuesday to Rs 27,390 ($329) per metric ton, the highest since February 10. Prices have risen by about 22 per cent over the past six months. "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.
Sanjeev Chopra, one of the most senior civil servants at the food ministry, had said last month the government has no immediate plans to abolish a 40 per cent import tax on wheat. As of October 1, wheat stocks in government warehouses stood at 24 million metric tons, sharply down compared with a five-year average of 37.6 million tons.
Domestic wheat prices are rising in the absence of imports and less than targeted procurement by the government, said Ashwini Bansod, head of commodities research at Phillip Capital India Pvt Ltd.
India managed to procure 26.2 million tons of wheat from farmers in 2023 against a target of 34.15 million tons. The market is also factoring in concerns over the El Nino weather pattern that could lead to warmer than normal temperatures during winter, and could have a negative impact on the upcoming wheat crop, Bansod said.
The government estimates wheat output jumped to a record 112.74 million metric tons in 2023, but a leading trade body said the harvest was at least 10% lower than the farm ministry's estimate. "The supply situation is poised to tighten further in the coming months, and there's a real risk of prices surging beyond Rs 30,000 unless the government opens the door to imports," said a Mumbai-based dealer with a global trade house.