New Delhi, December 5 (CommoditiesControl): Wheat prices held steady to firm today, supported by higher bids in the recent Open Market Sale Scheme (OMSS) auction. However, market participants note that the quantity provided by the government remains insufficient in comparison to the prevailing demand. On December 4, the government offered 1 lakh tons of wheat through the OMSS, but millers, already operating with minimal stock, anticipate this supply will not meet their needs. Additionally, millers with one month’s stock are excluded from participating in the auction.
The recent auction saw aggressive bidding above the reserve price of ₹2,325 per quintal, which could support wheat prices in the near term in the physical market. Prices in several key markets have moved higher as a result. In Delhi, wheat prices increased by ₹20 per quintal to ₹3,150, while Uttar Pradesh saw an increase of ₹30 to ₹2,960. Other regions also witnessed price hikes, with Madhya Pradesh, Gujarat, and Rajasthan trading up by ₹10 to ₹20 per quintal. South India saw wheat prices rise by ₹20 per quintal to ₹3,340.
India’s wheat sowing area has expanded to 20 million hectares as of November 29, 2024, compared to 18.8 million hectares during the same period last year. This increase reflects a broader trend of farmers shifting from oilseeds such as mustard to wheat and coarse cereals like jowar and chana. However, despite the larger sowing area, wheat stocks with the government remain low, and the stock position raises concerns over food inflation, particularly if adverse weather conditions affect the crop.
The government is expected to release additional wheat in the Public Distribution System (PDS) if off-take stays high, but the exact amount will depend on future demand. The PDS allocation for wheat is set at 21.7 million tons, with 10 million tons already released as of October 2024. If the off-take reaches 20 million tons, 1.7 million tons may be released under the OMSS, although this will be determined by future trends.
The government’s stance on wheat imports remains cautious. Wheat imports are currently taxed at 40%, effectively making imported wheat less competitive. A potential reduction in import duties could encourage imports, stabilizing prices, but the government is hesitant to act before December 15 due to concerns about signaling negative signals to farmers amid sowing season.
International wheat markets remain stable, supported by a strong harvest in Australia, but domestic supply constraints continue to support prices. With the government's wheat stocks nearing buffer levels, there are concerns about the ability to manage future price volatility, especially in the event of adverse weather or unforeseen demand spikes.
Given the current situation, wheat prices are expected to recover in the near term but are unlikely to rise sharply. The government's actions in the coming weeks, including increasing OMSS allocations, will likely contribute to price stability. However, wheat prices are expected to remain volatile amid ongoing developments.
(By Commoditiescontrol Bureau; +91 98201 3018)
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