FCI could not meet the target of wheat procurement

“FCI will not be able to procure its fixed target for wheat as private traders and millers are offering more remunerative prices to buy farmers’ produce. This will result in procurement of about 26 million tonnes of wheat this season,” said Ashok Meena, chairman and managing director of the agency.

In some states like Uttar Pradesh and Bihar, farmers are willing to sell their wheat crop to traders, millers and stockists due to higher market prices. This is the reason why FCI procurement in these states has been much lower than in Punjab and Haryana, said Navneet Chitlangia, vice-president of the Roller Flour Mills Federation of India.

Fair Average Quality (FAQ) wheat is being traded in major wholesale markets of Uttar Pradesh and Bihar 2,100-2,300 per quintal, while it is at Rs. 2,125-2,126 per quintal in Punjab and Haryana, according to the Agriculture Ministry’s Agmarknet portal.

FCI is procuring wheat at minimum support price 2,125 per quintal.

According to industry people, some farmers across the country are holding on to their produce in the hope of getting something like last year’s prices – they are neither selling it to the government nor to private traders. Last year, wheat prices hit a record high and kept rising until in January the government came up with a system to release the grain into the open market. “Farmers are expecting a similar trend this year as well, which may not happen,” Chitlangia said.

It is learned that farmers are refraining from selling only substandard quality wheat, which was not accepted for procurement as per FCI norms. “Prices are expected to increase, but not as much as last year. After government procurement ends in June, further arrivals start to decline, and farmers are expected to sell their produce when prices rise above current levels,” said Sanjay Gupta, Managing Director and CEO, National Commodities Management Services Ltd.

“However, the price situation will become clear only after two months after the farmers sow the kharif crops.” Stockists fear that if prices rise, the government may intervene and impose stock limits on wheat as happened last year. Indrajit Paul, assistant general manager at agritech company Dehat, said, “Industrial consumers are stocking on an average for 1.5-2 months for operational purposes.”

“It is good that farmers are benefiting from the remunerative prices offered by private traders and millers,” said Subodh Kumar Singh, additional secretary, Department of Food and Public Distribution.

“Our requirement for the (subsidised) public distribution system is 18.5 MT and the buffer requirement is 7.5 MT. As far as procurement is concerned, FCI has procured 24.6 MT of wheat till May 7. More procurement is expected as the procurement drive will go on till June.”

“Nothing like that is a buy target. The government fixes an approximate target for procurement taking into account the maximum figures, so that funds can be arranged in advance and farmers can be paid at the earliest.

“A 10% increase in wheat prices leads to an increase of about 30 bps in headline inflation. HDFC Bank deputy vice president Sakshi Gupta said this is only a direct impact, passing through higher fodder prices and a rise in milk and meat prices also has a significant indirect impact on inflation. “Retail and wholesale inflation readings are expected to ease in the coming months, and retail inflation is expected to average 5.3% in FY20.

Any rise in cereal inflation amid El Nino predictions could derail the deflationary trend and have second-round effects on inflation, weighing on rural consumption – lower discretionary spending by rural households which accounts for 50% allocate the majority of their consumption basket on more food items. This in turn could take a toll on the rural economy if inflation continues to rise. Proactive supply-side measures will be important in any inflationary pressure in cereals, the economist said.