India’s Wheat Dilemma: Record Sales Amidst 16-Year Low Stocks Ignite Supply Concerns
India faces a wheat crisis with lowest stocks in 16 years, prompting record sales to counter rising prices. Despite resistance to imports, strategic sales from state reserves are underway. May inventories increase but remain below government’s buffer target. Output hit by higher temperatures. Seasonal cycle affects production. Export ban due to global shortfall. Proactive measures aim to alleviate supply concerns, but import reluctance raises questions about long-term sustainability.
India faces a wheat crisis with its government warehouses reporting the lowest stocks in 16 years, down 10.3% year-on-year, prompting record sales to bolster domestic supplies and counter rising prices. Despite resistance to import encouragement and bans on exports, strategic sales from state reserves are underway, with May inventories higher than April but still below the government’s buffer target.
Highlights
Lowest Wheat Stocks in 16 Years: Indian government warehouses report the lowest wheat stocks since 2008, down 10.3% year-on-year due to two years of low crops.
Record Sales to Boost Supplies: Record volumes of wheat were sold to boost domestic supplies and lower local prices amidst tight supply conditions.
May Inventory Increase: May wheat reserves stand at 26 million metric tons, higher than April stocks of 7.5 million metric tons, boosted by new season purchases by the Food Corporation of India.
Output Hit by Higher Temperatures: Wheat output in 2022 and 2023 was affected by higher temperatures, contributing to the decline in stocks.
Resistance to Import Encouragement: Despite tight supply conditions, New Delhi resists calls to encourage imports by cutting or removing the current 40% tax on imports or by buying directly from leading suppliers like Russia.
Sales from State Reserves: The government sells wheat from state reserves to bulk consumers to curb domestic prices that have been above the state-fixed minimum buying price.
Record Sales from State Reserves: The Food Corporation of India has sold over 10 million tons of wheat from state reserves to private players since June 2023.
Seasonal Cycle of Wheat Production: India grows only one wheat crop annually, with planting in October-November and harvesting from March, with new season purchases starting in April.
Stocks Meet Strategic Reserve Target: While May stocks are lower than the previous year, they are higher than the government buffer and strategic reserve target of 7.46 million tons for the quarter beginning April 1.
Export Ban and Global Shortfall: India banned wheat exports in 2022 due to global shortfall caused by the Russia-Ukraine conflict, despite rising export demand.
Conclusion
India’s wheat market is grappling with the repercussions of two consecutive years of low crops, exacerbated by external factors like global supply shortfalls due to geopolitical tensions. The government’s proactive measures to alleviate supply concerns through record sales from state reserves highlight the severity of the situation. However, the reluctance to ease import restrictions raises questions about long-term sustainability and the need for strategic planning to ensure food security amidst changing climatic and geopolitical dynamics.
Source Link : https://in.investing.com/news/indias-wheat-dilemma-record-sales-amidst-16year-low-stocks-ignite-supply-concerns-4188288
Recommended for you
