Wheat dropped amid higher supply and increasing arrivals
The wheat market witnessed a bearish trend as prices fell by 1.90% to close at 2260 per quintal. The main factors behind the price decline were the higher supply of wheat in the domestic market and the rising arrivals of the new crop. The government of India has estimated a record wheat production of 112.2 million metric tons (MMT) for the current season, up by 2.6% from the previous year. The global wheat output is also expected to increase by 5.14 MMT, according to the latest report by the United States Department of Agriculture (USDA).
The daily arrivals of wheat in the major mandis have also picked up pace as the harvesting season progresses. The higher arrivals have put pressure on the prices as the demand remains subdued. Another factor that has weighed on wheat prices is the quality issue of the crop due to the recent spells of rainfall in some of the key producing states. The unseasonal rains have affected 8-10 MMT of wheat crop quality in Uttar Pradesh, Rajasthan, Punjab, Haryana, and Madhya Pradesh, resulting in higher moisture content and lower protein content. However, the yield of the crop has not been impacted much by the weather conditions.
The wheat stocks in the central pool have also declined sharply as compared to last year. As of March 1st, 2023, the wheat stocks stood at 11.67 MMT, down by 50.1% year-on-year and 24% month-on-month. The lower stocks reflect the lower procurement by the Food Corporation of India (FCI) in the previous season due to the lockdown and logistical constraints amid the Covid-19 pandemic. The FCI has set a target of procuring 34.15 MMT of wheat in the current season, which is higher than the actual procurement of 30.82 MMT in the last season. So far, the FCI has procured around 4 MMT of wheat, which is better than the pace of procurement in the same period last year.
