Indian wheat farmers are earning more this year, thanks to a sharp increase in exports after the February 24 start of the Russian invasion of neighbouring Ukraine, which has disrupted global supply chains.
Prices have exceeded the government-fixed minimum support price (MSP) of Rs 2,015 per quintal of wheat. To make available more wheat for overseas shipments, the Centre has cut purchases from farmers for its welfare programmes.
The government has reduced its purchases to 19.5 million tonnes, from an original estimate of 44.4 million tonnes, Union food secretary Sudhanshu Pandey said.
Wheat prices have been hovering in the range of Rs 2,100 to 2,300 per quintal. Many farmers are holding the stock in anticipation of higher prices. If exports remain robust, prices may rise further.
The country requires around 25 million tonnes for its food welfare programmes; last year, the government purchased a record 43.34 million tonnes, which has provided it with a comfortable buffer stock after meeting its needs.
Jump in monthly exports
Exporters have been busy this year as global buyers have turned to India, the second-largest producer of wheat, after the onset of the Russia-Ukraine war. Russia and Ukraine together accounted for 30% of the global wheat supply.
“From 10,000 to 20,000 tonnes a month, our export of wheat has gone up to 200,000 tonnes. We are exploring new markets other than traditional Western Asian countries like the UAE and Oman. We are looking at Egypt and Indonesia .which have a huge demand for wheat,’’ said Fauzan Alavi, director of Allanasons Pvt. Ltd, an exporter of agricultural commodities.
Rising international demand has forced exporters to pay more than MSP to farmers.
“We have to buy wheat under Rs 2,300 per quintal and sell it for around Rs 2,350, which gives us only a small margin. But we have been able to triple exports in the last few months,’’ said Aditya G, a top management executive of Delhi-based trading company Shri Lal Mahal Ltd.
Global wheat prices increased to the Rs 2,400-2,500 levels in March after the start of the conflict in Europe. Prices have eased since.
Pandemic impact
Exports have been on the rise for the last couple of years as the COVID-19 pandemic hit the world wheat supply.
“There have been more enquiries for supply since COVID-19 started, with crops suffering damage in several countries. With operations coming back to normal, there was a slowdown in demand at the beginning of the year. But the war has again created a supply-demand mismatch,’’ said Aditya.
Data from the Agricultural and Process Food Products Export Development Authority (APEDA) shows that wheat exports from India reached 6669154 tonnes valued at Rs 14,477 crore during the April-February period of 2021-22 compared to 1773821 tonnes valued at Rs 3,419 crore in the same period of the previous year.
Volumes have vaulted by 275% while the value has soared by over 320%. Provisional figures from the government show that total exports rose to 7.8 million tonnes for the year against 2.1 million tonnes in 2020-21.
Production in step with demand
Production has kept pace with the mounting shipments. From 107.8 million tonnes in 2019-20, it rose to 109.6 million tonnes in 2020-21. Although production had been expected to increase to over 111 million tonnes in 2021-22, the early onset of summer and heat waves have thrown a spanner in the works.
According to the current outlook of the government, output could fall below even the last year’s figure as the harvest has not been completed.
P Chengal Reddy, secretary-general of the Consortium of Indian Farmers Associations, says gains to farmers have been limited by rising input costs.
“Higher diesel prices have raised the tractor charges. Fertiliser prices have doubled and pesticide prices have gone up by 20 to 30%. Labour wages too have increased in the last couple of years, “ Reddy said.
Domestic industry hit
The Rs 40 increase in the MSP of wheat from Rs 1,975 per quintal is not enough to cover the increasing costs farmers are incurring, Reddy said.
He lamented that farmers, a majority of whom fall in the small category, did not have adequate storage facilities and that productivity and application of technology in India was low compared to other wheat-producing countries.
“This year the exporters are buying more from the farmers but there is no long-term export plan or incentives to encourage exports,’’ he said.
Higher wheat prices, however, have hit the domestic food industry, which makes wheat-based products like atta, biscuits and bread. Some companies have enforced a marginal price increase, but others have decided to keep prices unchanged.
“We are buying wheat at Rs 2,100 per quintal compared to Rs 1,700-1,800 in the last year. But we have not raised the retail prices and have decided to absorb the loss for the benefit of the consumers,’’ said Ashish Khandelwal, managing director of BL Agro Ltd., manufacturer of Chakki brand atta.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
