Indian Wheat Prices Soar to 8-Month High Amid Festival Frenzy

Wheat prices have reached an eight-month peak due to robust demand during the festive season and constrained supply, as per reports from news agency Reuters. This situation arises as import duties have made it challenging for domestic flour mills to engage in overseas procurement.

To maintain sufficient supplies and price stability, especially in anticipation of state assembly elections and a general election next year, the government might have to consider releasing additional stocks from inventories and eliminating import duties. This move could potentially mitigate the impact of increasing wheat prices on food inflation, according to the agency’s report.

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Wheat Prices Reach 8-Month High in Delhi Amid Festival Season Demand

In Delhi, wheat prices jumped by 1.6 per cent on Tuesday, reaching Rs 27,390 per metric ton, the highest level since February 10. Over the past six months, prices have surged by nearly 22 per cent.

Pramod Kumar S, President of the Roller Flour Millers’ Federation, told the news agency that festival season demand is propelling the increase in wheat prices and called for the government to allow duty-free imports to mitigate rising costs.

“Festival season demand is driving up wheat prices. The government needs to permit duty-free imports to reduce prices,” he said.

While India currently doesn’t have immediate intentions to abolish the 40 percent import tax on wheat, there is mounting apprehension regarding the diminishing wheat reserves in government storage facilities. As of October 1, these stocks amounted to 24 million metric tons, which is considerably below the five-year average of 37.6 million tons.

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Challenges Loom Over Wheat Supply and Procurement in India

Ashwini Bansod, Head of Commodities Research at Phillip Capital India Pvt Ltd, noted that domestic wheat prices are rising due to the absence of imports and the government’s failure to meet its procurement targets.

In 2023, India procured 26.2 million tons of wheat from farmers against a target of 34.15 million tons.

Additionally, the market is taking into account concerns regarding the El Nino weather pattern, which could lead to warmer-than-normal winter temperatures and potentially negatively impact the upcoming wheat crop.

While the government estimates record-high wheat output of 112.74 million metric tons in 2023, a leading trade body suggests that the harvest is at least 10 per cent lower than the farm ministry’s estimate.

A Mumbai-based dealer with a global trade house told the news agency that unless the government opens the door to imports, the supply situation may tighten further in the coming months, with a real risk of prices surging beyond Rs 30,000.

“The supply conditions are expected to become even more constrained in the upcoming months, and there is a genuine threat of prices rising above 30,000 rupees unless the government allows imports,” stated the dealer.