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LATEST NEWS UPDATES | With higher output, lower prices and likely import curbs, wheat may go the pulses way -G Chandrashekhar

With higher output, lower prices and likely import curbs, wheat may go the pulses way -G Chandrashekhar

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published Published on Apr 12, 2018   modified Modified on Apr 12, 2018
-The Hindu Business Line

The Indian wheat situation is turning worrisome, not because of the over-optimistic production estimate released by the Ministry of Agriculture recently, but because of the current price levels that provide no encouragement to farmers.

Fraught with possibilities, the wheat may go the pulses way. The policy-makers may soon be forced to impose import restrictions in the form of higher tariffs.

Output, prices

To start with, no one in the trade believes the Government’s crop estimate of 97.1 million tonnes (mt). Eventual harvest number may be much lower, in the region of 92-93 mt — still a large enough crop for the country.

Notwithstanding this, wheat may pose a big logistics challenge for the State agencies including the Food Corporation of India (FCI). Mandi prices are currently at or below the procurement price of ?1,735 per quintal.

Given this, as we move toward peak harvest and arrival time in the principal growing States of Punjab and Haryana, farmers are likely to offer maximum quantities for official procurement. Already, the Chief Ministers of Punjab and Uttar Pradesh are keen that the government purchases are maximised in the two States.

Procurement operations

On current reckoning, it appears the procurement agencies will end up purchasing 31-32 mt this season. Together with the opening stocks, at the end of the procurement cycle (that is by June), the government agencies may hold well over 40 mt — a humongous quantity by any reckoning.

The challenge is to then liquidate the stocks in the domestic market. There is no choice but to undertake open market sales, say from August onwards. Every month of storage pushes up the cost (represented by warehouse rent, interest and incidentals) and makes the grain more expensive and less competitive. One way to support domestic growers and prop up wheat prices as well as consumption is to restrict the import of the fine cereal.

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The Hindu Business Line, 11 April, 2018, https://www.thehindubusinessline.com/markets/commodities/with-higher-output-lower-prices-and-likely-import-curbs-wheat-may-go-the-pulses-way/article23505288.ec


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