NEW DELHI: Wheat prices have begun to dip in anticipation of the high 78-million-tonne production adding to last year’s leftovers, causing
storage problem and a glut in the domestic market. This has raised demands that the government fix a date for removing the two-year ban on exports to clear the massive surplus and create space.
The government has committed to in-principle lifting the ban on exports of wheat and wheat products in May after the general elections are over, but no date is fixed yet.
The anticipation of an imminent overcrowding in the wheat market has pushed down wheat prices this week by Rs 20 per quintal to Rs 1,580 (March 25) from Rs 1,600 per quintal. That this is not part of a general trend of declining prices is evident in that prices of tur dal, urad dal, moong dal, gram dal, maida and sooji all remained largely unchanged.
The state agencies are expected to buy an estimated 24 million tonnes in the 2009-10 season, compared to 22.5 million tonnes last year, when official purchases begin on April 1. With 25% of the current stock lying in the open, the arrival of fresh harvest and procurement would create more problems of storage, therefore the need for exports.
In early March, an empowered group of ministers (EGoM) had decided in-principle to lift the two-year-old ban on exports of wheat and wheat products in May, after the general elections were over — lower wheat and food prices are expected to soften up voters towards the governing combine of parties.
A notification is expected in May, after which two million tonnes of wheat are expected to be shipped out. As a preamble, Bangladesh bought some wheat from India this week. Wheat exports were banned in February 2007, following poor state procurement for welfare programmes. This led to high-priced wheat imports.
However, it is likely the export market may not be remunerative by the time the country starts exporting. The International Grains Council (IGC) estimated in its monthly report on Thursday that world wheat production should fall to 651 million tonnes in 2009-10, down from a record 688 million in 2008-09 with area expected to fall by 1%.
It said, however, that wheat carryover stocks for 2009-10 would be higher, rising by 11 million to 171 million, since consumption was expected to fall to 640 million from 643 million in 2008-09 due to a drop in animal feed use.
So, while the traditional logic dictates that the lower output of wheat globally spells higher prices, the lower consumption and higher carryover stocks could nullify that to an extent.
Source : The Economic Times