Indian government plans aggressive wheat procurement to replenish stocks: officials

The Indian government is planning to aggressively procure wheat to replenish its stocks at state-run warehouses, officials with the Food Corporation of India said.

However, a likely rise in government's procurement may also lead to supply tightness in domestic markets of India, traders said.

The government plans to procure around 33.5 million mt wheat produced in marketing year 2024-25 (April-March), nearly 28% higher than the actual procurement of 26.2 million mt a year prior.

"We are hopeful of increasing procurement due to a slight increase in production. However, there are certain issues as recent showers have delayed the harvest," an official with FCI said.

The government has pegged India's wheat output in crop year 2023-24 (July-June) at 112 million mt, slightly higher than 110.55 million mt harvested in the previous season. According to farm ministry officials, Uttar Pradesh is expected to produce 35.48 million mt, Madhya Pradesh 23.48 million mt, Punjab 16.13 million mt, Haryana 11.21 million mt, Rajasthan 10.42 million mt and Bihar 6.33 million mt, among others.

However, an S&P Global Commodity Insights survey of 13 analysts and traders found India's wheat harvest in MY 2023-24 is likely slightly lower year on year, at 107 million-108 million mt.

Recent rainfall in parts of northern India has also delayed wheat harvest in some states and may in turn weigh on the pace of the government's purchases, traders said.

There are also concerns over farmer's willingness to sell to the government at the minimum support price of Rupee 22,750/mt ($274.44/mt) as spot prices in some key markets are higher than the assured prices, traders said. Currently, wheat prices are at Rupee 23,550-24,000/mt, higher than the government's assured prices.

Wheat prices in key domestic markets have been increasing over the past few months as production declined in MY 2022-23 due to extreme heat waves during March-April, key harvest season, traders said.

"A higher wholesale price may weigh on the government's plan to replenish stocks," an official with the food ministry said.

The government has been pushing for higher wheat procurement as government stocks have depleted significantly over the past few years. India's wheat stocks dwindled to the lowest since 2018 as of March 1, 2024, when the FCI recorded 9.69 million mt of wheat in government warehouses, compared with 11.67 million mt the previous year, officials said.

Under buffer stock requirements, the FCI should have 7.46 mt wheat in government warehouses as of April 1.