Wheat Prices Hit A Fresh High

Prices of wheat surged to a fresh high amid delays caused by the central government in releasing stocks.

The daily average retail price of wheat rose to Rs 33.33 per kg on Jan. 24, 2023, compared to Rs 32.86 per kg a week ago and Rs 28.33 a year ago, according to data from the Department of Consumer Affairs.

The daily average retail prices of wheat flour rose to Rs 37.85 per kg for the same day, as against Rs 37.56 per kg a week ago and Rs 31.59 a year ago.

Currently, prices of wheat have surged to a new high due to the delay in releasing stocks; the supply shortage pushed prices higher amid strong demand, according to Jahnavi Prabhakar, economist at Bank of Baroda Ltd.

India had banned wheat exports in May 2022 due to lower output as the temperature soared. According to an estimate, wheat output was much lower at 106.8 million tonnes in 2021-22, compared with 109.6 MT in the previous fiscal, Prabhakar said.

Markets had already been tackling the wheat shortage since last year and its impact has been visible this year too, she said.

Agricultural analyst Devinder Sharma said the rise in price was driven by a supply shortfall. It was also likely because of lack of discipline in trade along with hoarding and speculation, Sharma said.

For the current agricultural year 2022-23, the first advance estimates also show lower production of rice than a year ago. The production of rice is estimated at 104.99 MT. The first kharif rice production estimate is lesser by 6.77 MT as compared to 111.76 MT of the fourth advance estimates during 2021-22, according to the PIB.

However, the current kharif rice production estimate is higher by 4.40 MT than the average kharif rice production of 100.59 MT between 2016-17 and 2020-21.

Wheat is a rabi crop and the second advance estimates covering all crops—kharif and rabi—are released in February.

Stocks of rice and wheat held by the Food Corp. of India have also dwindled to the lowest since February 2017.

Wheat stocks stood at 171.7 lakh tonnes as on Jan. 24, 2023, while rice stocks stood at 125.35 lakh tonnes on the same date, according to data from FCI.

That's above the current food grain stocking norms, which state that it should be at a minimum of 214.1 lakh tonnes, with operational stocks for wheat at 164.1 lakh tonnes and strategic stocks at 30 lakh tonnes.

Wheat prices rose by 22.2% in December 2022—the highest since at least 2015. Data prior to that is not available.

The rise in prices of wheat and flour led to a spike in inflation in products including maida, suji, rava, sevai, noodles, bread and biscuits.

Cereal prices are already on an uptrend. With its weight in CPI, it is likely to keep food inflation under pressure in the near term, Prabhakar said.

Even under WPI, wheat inflation had edged up to an all-time high in this series in December 2022 at 20.7%. Prices had also surged last year as Russia had initially withdrawn from the Black Sea corridor, though it rejoined it later, she said.

On the global front, too, international wheat prices have risen by 36% annually this year, Prabhakar said.