Informist, Friday, Mar 24, 2023
By Abhijit Doshi
MUMBAI - Recent communication by rating agency CRISIL's subsidiary about the damage to India's 2023 rabi crops is only the latest narration of the impact of climatic factors. Various agencies and economic commentators have articulated concern with uncertainty about output of various rabi crops, including wheat, one of the most important cereals in terms of consumption across the country.
A report by CRISIL Market Intelligence and Analytics, released Wednesday, said the ongoing harvest for rabi crops, including wheat, has been lashed by an untimely torrent, causing damage to rabi crops--some already harvested, some ready to harvest and some in the development stage.
WEATHER FACTOR
The unusual behaviour of weather, first abnormal heat in some regions and then unseasonal rains in some others, has created uncertainty about the size of wheat output this season. The government has estimated the cereal's output at 112.2 mln tn, 4.2% above the previous year's output at 107.7 mln tn. At 112.2 mln tn, wheat output in the country would reach a record high level.
Considering that wheat is sown from October and harvesting starts around April, the climatic disturbances have come at a crucial time for the cereal.
The day temperature started rising above normal in mid-February, with the maximum temperature in some wheat-growing areas going upwards of 39 degrees Celsius, nearly 10 degrees higher than normal, according to the India Meteorology Department.
Also worrisome is the weather bureau’s prediction that abnormal heat could be recorded in the three-month period between March and May, particularly in the wheat growing regions--a period that is crucial for wheat crop. It could result in early maturity of the crop and the resultant grains could be of poor quality.
Some part of the crops, sown later in the season, could also perish. In regions where harvesting has already begun, the effect is visible, according to reports.
While temperature stopped rising later, the current untimely hailstorms and rains have further aggravated the situation. For two weeks now, the IMD has been warning of rains and thunderstorm in a large number of regions and even issued advisories to farmers to harvest wheat in a hurry.
This looks like a repeat performance. Just a year ago, in 2022, heatwaves in March had badly affected India's wheat production. Although the government estimates put the 2022 wheat output at 107.7 mln tn, trade estimates were much lower at around 100 mln tn.
PRICES
Wheat prices in January had started rising, and according to data available with Agmarknet, a government set up, price in Kota mandi in Rajasthan was above 2,600 rupees per 100 kg, and on some days was nearly 3,000 rupees. The high price galvanised the government machinery, leading to announcement of auctions.
GOVERNMENT AUCTIONS
The government in February decided to release wheat in the open market through auctions from its stocks, under Open Market Sales Scheme-Domestic. Between Feb 1 and Mar 15, it conducted six weekly auctions, and released 3.38 mln tn of wheat at prices ranging from 2,173-2,474 rupees per 100 kg.
While announcing the auction programme, the government had said the process would continue until mid-March. So one may surmise that the auction programme has been concluded now. After conducting six successive weekly auctions, the government did not conduct any auction in the week started Monday. However, it seems to have kept its options open: while announcing the results of the sixth auction, it said wheat and atta prices are likely to remain stabilised “with the future tenders for open sale of wheat under OMMS(D).”
Wheat prices have come down in recent weeks to around 2,150 rupees per 100 kg because of the government auctions and also because arrivals of new crop started in some markets. But if they start rising again, will the government be able to meet this commitment?
The ability of the government to release stocks in the market was obviously limited by the fall in the stocks it held. As of Mar 1, the Food Corp of India held 5.02 mln tn of wheat in stock, while the state-level agencies had 6.64 mln tn. This stock of 11.67 mln tn was much lower than 23.4 mln tn a year ago, and a recent low. The government-prescribed norms for such stocks are 7.46 mlm tn as on the first of April, and 27.5 mln tn on Jul 1.
PROCUREMENT
Whether the government will have enough stock of wheat in months to come will depend on procurement, scheduled to begin in April. If the crop turns out to be much lower than estimated, as many traders fear, the government may have to pay high prices to farmers for procurement, leading to larger fiscal deficit and its consequences. The minimum support price for wheat in the current season is 2,125 rupees per 100 kg, but the government may end up paying much higher price.
The government is looking forward to procure around 34 mln tn of wheat from the open market this season, which looks like a tall order. Last year, it could procure only 18.79 mln tn of wheat as against 44.43 mln tn a year ago.
IS IMPORT AN OPTION?
With market putting the wheat output this rabi at 103-109 mln tn, the supply could be precariously close to estimated annual consumption of around 104 mln tn. To keep prices at reasonable levels, stocks with the government would be crucial. While the government has already banned wheat export, it has yet to show willingness to import the grain to shore up its stocks.
The next few weeks, when arrivals gather speed, will be critical for the government to get a good idea about the crop. If it decides to import wheat, it may not be a difficult option, given the softness of global wheat prices. At $6.62 per bushel, the current global price of wheat on CBOT is much lower than $11.82 a year ago, when the Russian invasion of Ukraine had created a shortage of the grain. These two countries together account for nearly 40% of global exports of wheat.
However, the government firmly believes that the climatic factors currently being witnessed would not seriously impact wheat crop. Union Agriculture Minister Narendra Singh Tomar last week said there has not been any effect seen so far on wheat crop due to high temperatures and it will be too early to say about the likely impact. But, according to media report, he also added: "Weather-related challenges are always there in front of agriculture."
Touche.
End
US$1 = 82.25 rupees
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Mar 24, 2023
By Abhijit Doshi
MUMBAI - Recent communication by rating agency CRISIL's subsidiary about the damage to India's 2023 rabi crops is only the latest narration of the impact of climatic factors. Various agencies and economic commentators have articulated concern with uncertainty about output of various rabi crops, including wheat, one of the most important cereals in terms of consumption across the country.
A report by CRISIL Market Intelligence and Analytics, released Wednesday, said the ongoing harvest for rabi crops, including wheat, has been lashed by an untimely torrent, causing damage to rabi crops--some already harvested, some ready to harvest and some in the development stage.
WEATHER FACTOR
The unusual behaviour of weather, first abnormal heat in some regions and then unseasonal rains in some others, has created uncertainty about the size of wheat output this season. The government has estimated the cereal's output at 112.2 mln tn, 4.2% above the previous year's output at 107.7 mln tn. At 112.2 mln tn, wheat output in the country would reach a record high level.
Considering that wheat is sown from October and harvesting starts around April, the climatic disturbances have come at a crucial time for the cereal.
The day temperature started rising above normal in mid-February, with the maximum temperature in some wheat-growing areas going upwards of 39 degrees Celsius, nearly 10 degrees higher than normal, according to the India Meteorology Department.
Also worrisome is the weather bureau’s prediction that abnormal heat could be recorded in the three-month period between March and May, particularly in the wheat growing regions--a period that is crucial for wheat crop. It could result in early maturity of the crop and the resultant grains could be of poor quality.
Some part of the crops, sown later in the season, could also perish. In regions where harvesting has already begun, the effect is visible, according to reports.
While temperature stopped rising later, the current untimely hailstorms and rains have further aggravated the situation. For two weeks now, the IMD has been warning of rains and thunderstorm in a large number of regions and even issued advisories to farmers to harvest wheat in a hurry.
This looks like a repeat performance. Just a year ago, in 2022, heatwaves in March had badly affected India's wheat production. Although the government estimates put the 2022 wheat output at 107.7 mln tn, trade estimates were much lower at around 100 mln tn.
PRICES
Wheat prices in January had started rising, and according to data available with Agmarknet, a government set up, price in Kota mandi in Rajasthan was above 2,600 rupees per 100 kg, and on some days was nearly 3,000 rupees. The high price galvanised the government machinery, leading to announcement of auctions.
GOVERNMENT AUCTIONS
The government in February decided to release wheat in the open market through auctions from its stocks, under Open Market Sales Scheme-Domestic. Between Feb 1 and Mar 15, it conducted six weekly auctions, and released 3.38 mln tn of wheat at prices ranging from 2,173-2,474 rupees per 100 kg.
While announcing the auction programme, the government had said the process would continue until mid-March. So one may surmise that the auction programme has been concluded now. After conducting six successive weekly auctions, the government did not conduct any auction in the week started Monday. However, it seems to have kept its options open: while announcing the results of the sixth auction, it said wheat and atta prices are likely to remain stabilised “with the future tenders for open sale of wheat under OMMS(D).”
Wheat prices have come down in recent weeks to around 2,150 rupees per 100 kg because of the government auctions and also because arrivals of new crop started in some markets. But if they start rising again, will the government be able to meet this commitment?
The ability of the government to release stocks in the market was obviously limited by the fall in the stocks it held. As of Mar 1, the Food Corp of India held 5.02 mln tn of wheat in stock, while the state-level agencies had 6.64 mln tn. This stock of 11.67 mln tn was much lower than 23.4 mln tn a year ago, and a recent low. The government-prescribed norms for such stocks are 7.46 mlm tn as on the first of April, and 27.5 mln tn on Jul 1.
PROCUREMENT
Whether the government will have enough stock of wheat in months to come will depend on procurement, scheduled to begin in April. If the crop turns out to be much lower than estimated, as many traders fear, the government may have to pay high prices to farmers for procurement, leading to larger fiscal deficit and its consequences. The minimum support price for wheat in the current season is 2,125 rupees per 100 kg, but the government may end up paying much higher price.
The government is looking forward to procure around 34 mln tn of wheat from the open market this season, which looks like a tall order. Last year, it could procure only 18.79 mln tn of wheat as against 44.43 mln tn a year ago.
IS IMPORT AN OPTION?
With market putting the wheat output this rabi at 103-109 mln tn, the supply could be precariously close to estimated annual consumption of around 104 mln tn. To keep prices at reasonable levels, stocks with the government would be crucial. While the government has already banned wheat export, it has yet to show willingness to import the grain to shore up its stocks.
The next few weeks, when arrivals gather speed, will be critical for the government to get a good idea about the crop. If it decides to import wheat, it may not be a difficult option, given the softness of global wheat prices. At $6.62 per bushel, the current global price of wheat on CBOT is much lower than $11.82 a year ago, when the Russian invasion of Ukraine had created a shortage of the grain. These two countries together account for nearly 40% of global exports of wheat.
However, the government firmly believes that the climatic factors currently being witnessed would not seriously impact wheat crop. Union Agriculture Minister Narendra Singh Tomar last week said there has not been any effect seen so far on wheat crop due to high temperatures and it will be too early to say about the likely impact. But, according to media report, he also added: "Weather-related challenges are always there in front of agriculture."
Touche.
End
US$1 = 82.25 rupees
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Mar 24, 2023
By Abhijit Doshi
MUMBAI - Recent communication by rating agency CRISIL's subsidiary about the damage to India's 2023 rabi crops is only the latest narration of the impact of climatic factors. Various agencies and economic commentators have articulated concern with uncertainty about output of various rabi crops, including wheat, one of the most important cereals in terms of consumption across the country.
A report by CRISIL Market Intelligence and Analytics, released Wednesday, said the ongoing harvest for rabi crops, including wheat, has been lashed by an untimely torrent, causing damage to rabi crops--some already harvested, some ready to harvest and some in the development stage.
WEATHER FACTOR
The unusual behaviour of weather, first abnormal heat in some regions and then unseasonal rains in some others, has created uncertainty about the size of wheat output this season. The government has estimated the cereal's output at 112.2 mln tn, 4.2% above the previous year's output at 107.7 mln tn. At 112.2 mln tn, wheat output in the country would reach a record high level.
Considering that wheat is sown from October and harvesting starts around April, the climatic disturbances have come at a crucial time for the cereal.
The day temperature started rising above normal in mid-February, with the maximum temperature in some wheat-growing areas going upwards of 39 degrees Celsius, nearly 10 degrees higher than normal, according to the India Meteorology Department.
Also worrisome is the weather bureau’s prediction that abnormal heat could be recorded in the three-month period between March and May, particularly in the wheat growing regions--a period that is crucial for wheat crop. It could result in early maturity of the crop and the resultant grains could be of poor quality.
Some part of the crops, sown later in the season, could also perish. In regions where harvesting has already begun, the effect is visible, according to reports.
While temperature stopped rising later, the current untimely hailstorms and rains have further aggravated the situation. For two weeks now, the IMD has been warning of rains and thunderstorm in a large number of regions and even issued advisories to farmers to harvest wheat in a hurry.
This looks like a repeat performance. Just a year ago, in 2022, heatwaves in March had badly affected India's wheat production. Although the government estimates put the 2022 wheat output at 107.7 mln tn, trade estimates were much lower at around 100 mln tn.
PRICES
Wheat prices in January had started rising, and according to data available with Agmarknet, a government set up, price in Kota mandi in Rajasthan was above 2,600 rupees per 100 kg, and on some days was nearly 3,000 rupees. The high price galvanised the government machinery, leading to announcement of auctions.
GOVERNMENT AUCTIONS
The government in February decided to release wheat in the open market through auctions from its stocks, under Open Market Sales Scheme-Domestic. Between Feb 1 and Mar 15, it conducted six weekly auctions, and released 3.38 mln tn of wheat at prices ranging from 2,173-2,474 rupees per 100 kg.
While announcing the auction programme, the government had said the process would continue until mid-March. So one may surmise that the auction programme has been concluded now. After conducting six successive weekly auctions, the government did not conduct any auction in the week started Monday. However, it seems to have kept its options open: while announcing the results of the sixth auction, it said wheat and atta prices are likely to remain stabilised “with the future tenders for open sale of wheat under OMMS(D).”
Wheat prices have come down in recent weeks to around 2,150 rupees per 100 kg because of the government auctions and also because arrivals of new crop started in some markets. But if they start rising again, will the government be able to meet this commitment?
The ability of the government to release stocks in the market was obviously limited by the fall in the stocks it held. As of Mar 1, the Food Corp of India held 5.02 mln tn of wheat in stock, while the state-level agencies had 6.64 mln tn. This stock of 11.67 mln tn was much lower than 23.4 mln tn a year ago, and a recent low. The government-prescribed norms for such stocks are 7.46 mlm tn as on the first of April, and 27.5 mln tn on Jul 1.
PROCUREMENT
Whether the government will have enough stock of wheat in months to come will depend on procurement, scheduled to begin in April. If the crop turns out to be much lower than estimated, as many traders fear, the government may have to pay high prices to farmers for procurement, leading to larger fiscal deficit and its consequences. The minimum support price for wheat in the current season is 2,125 rupees per 100 kg, but the government may end up paying much higher price.
The government is looking forward to procure around 34 mln tn of wheat from the open market this season, which looks like a tall order. Last year, it could procure only 18.79 mln tn of wheat as against 44.43 mln tn a year ago.
IS IMPORT AN OPTION?
With market putting the wheat output this rabi at 103-109 mln tn, the supply could be precariously close to estimated annual consumption of around 104 mln tn. To keep prices at reasonable levels, stocks with the government would be crucial. While the government has already banned wheat export, it has yet to show willingness to import the grain to shore up its stocks.
The next few weeks, when arrivals gather speed, will be critical for the government to get a good idea about the crop. If it decides to import wheat, it may not be a difficult option, given the softness of global wheat prices. At $6.62 per bushel, the current global price of wheat on CBOT is much lower than $11.82 a year ago, when the Russian invasion of Ukraine had created a shortage of the grain. These two countries together account for nearly 40% of global exports of wheat.
However, the government firmly believes that the climatic factors currently being witnessed would not seriously impact wheat crop. Union Agriculture Minister Narendra Singh Tomar last week said there has not been any effect seen so far on wheat crop due to high temperatures and it will be too early to say about the likely impact. But, according to media report, he also added: "Weather-related challenges are always there in front of agriculture."
Touche.
End
US$1 = 82.25 rupees
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Mar 24, 2023
By Abhijit Doshi
MUMBAI - Recent communication by rating agency CRISIL's subsidiary about the damage to India's 2023 rabi crops is only the latest narration of the impact of climatic factors. Various agencies and economic commentators have articulated concern with uncertainty about output of various rabi crops, including wheat, one of the most important cereals in terms of consumption across the country.
A report by CRISIL Market Intelligence and Analytics, released Wednesday, said the ongoing harvest for rabi crops, including wheat, has been lashed by an untimely torrent, causing damage to rabi crops--some already harvested, some ready to harvest and some in the development stage.
WEATHER FACTOR
The unusual behaviour of weather, first abnormal heat in some regions and then unseasonal rains in some others, has created uncertainty about the size of wheat output this season. The government has estimated the cereal's output at 112.2 mln tn, 4.2% above the previous year's output at 107.7 mln tn. At 112.2 mln tn, wheat output in the country would reach a record high level.
Considering that wheat is sown from October and harvesting starts around April, the climatic disturbances have come at a crucial time for the cereal.
The day temperature started rising above normal in mid-February, with the maximum temperature in some wheat-growing areas going upwards of 39 degrees Celsius, nearly 10 degrees higher than normal, according to the India Meteorology Department.
Also worrisome is the weather bureau’s prediction that abnormal heat could be recorded in the three-month period between March and May, particularly in the wheat growing regions--a period that is crucial for wheat crop. It could result in early maturity of the crop and the resultant grains could be of poor quality.
Some part of the crops, sown later in the season, could also perish. In regions where harvesting has already begun, the effect is visible, according to reports.
While temperature stopped rising later, the current untimely hailstorms and rains have further aggravated the situation. For two weeks now, the IMD has been warning of rains and thunderstorm in a large number of regions and even issued advisories to farmers to harvest wheat in a hurry.
This looks like a repeat performance. Just a year ago, in 2022, heatwaves in March had badly affected India's wheat production. Although the government estimates put the 2022 wheat output at 107.7 mln tn, trade estimates were much lower at around 100 mln tn.
PRICES
Wheat prices in January had started rising, and according to data available with Agmarknet, a government set up, price in Kota mandi in Rajasthan was above 2,600 rupees per 100 kg, and on some days was nearly 3,000 rupees. The high price galvanised the government machinery, leading to announcement of auctions.
GOVERNMENT AUCTIONS
The government in February decided to release wheat in the open market through auctions from its stocks, under Open Market Sales Scheme-Domestic. Between Feb 1 and Mar 15, it conducted six weekly auctions, and released 3.38 mln tn of wheat at prices ranging from 2,173-2,474 rupees per 100 kg.
While announcing the auction programme, the government had said the process would continue until mid-March. So one may surmise that the auction programme has been concluded now. After conducting six successive weekly auctions, the government did not conduct any auction in the week started Monday. However, it seems to have kept its options open: while announcing the results of the sixth auction, it said wheat and atta prices are likely to remain stabilised “with the future tenders for open sale of wheat under OMMS(D).”
Wheat prices have come down in recent weeks to around 2,150 rupees per 100 kg because of the government auctions and also because arrivals of new crop started in some markets. But if they start rising again, will the government be able to meet this commitment?
The ability of the government to release stocks in the market was obviously limited by the fall in the stocks it held. As of Mar 1, the Food Corp of India held 5.02 mln tn of wheat in stock, while the state-level agencies had 6.64 mln tn. This stock of 11.67 mln tn was much lower than 23.4 mln tn a year ago, and a recent low. The government-prescribed norms for such stocks are 7.46 mlm tn as on the first of April, and 27.5 mln tn on Jul 1.
PROCUREMENT
Whether the government will have enough stock of wheat in months to come will depend on procurement, scheduled to begin in April. If the crop turns out to be much lower than estimated, as many traders fear, the government may have to pay high prices to farmers for procurement, leading to larger fiscal deficit and its consequences. The minimum support price for wheat in the current season is 2,125 rupees per 100 kg, but the government may end up paying much higher price.
The government is looking forward to procure around 34 mln tn of wheat from the open market this season, which looks like a tall order. Last year, it could procure only 18.79 mln tn of wheat as against 44.43 mln tn a year ago.
IS IMPORT AN OPTION?
With market putting the wheat output this rabi at 103-109 mln tn, the supply could be precariously close to estimated annual consumption of around 104 mln tn. To keep prices at reasonable levels, stocks with the government would be crucial. While the government has already banned wheat export, it has yet to show willingness to import the grain to shore up its stocks.
The next few weeks, when arrivals gather speed, will be critical for the government to get a good idea about the crop. If it decides to import wheat, it may not be a difficult option, given the softness of global wheat prices. At $6.62 per bushel, the current global price of wheat on CBOT is much lower than $11.82 a year ago, when the Russian invasion of Ukraine had created a shortage of the grain. These two countries together account for nearly 40% of global exports of wheat.
However, the government firmly believes that the climatic factors currently being witnessed would not seriously impact wheat crop. Union Agriculture Minister Narendra Singh Tomar last week said there has not been any effect seen so far on wheat crop due to high temperatures and it will be too early to say about the likely impact. But, according to media report, he also added: "Weather-related challenges are always there in front of agriculture."
Touche.
End
US$1 = 82.25 rupees
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
Informist, Friday, Mar 24, 2023
By Abhijit Doshi
MUMBAI - Recent communication by rating agency CRISIL's subsidiary about the damage to India's 2023 rabi crops is only the latest narration of the impact of climatic factors. Various agencies and economic commentators have articulated concern with uncertainty about output of various rabi crops, including wheat, one of the most important cereals in terms of consumption across the country.
A report by CRISIL Market Intelligence and Analytics, released Wednesday, said the ongoing harvest for rabi crops, including wheat, has been lashed by an untimely torrent, causing damage to rabi crops--some already harvested, some ready to harvest and some in the development stage.
WEATHER FACTOR
The unusual behaviour of weather, first abnormal heat in some regions and then unseasonal rains in some others, has created uncertainty about the size of wheat output this season. The government has estimated the cereal's output at 112.2 mln tn, 4.2% above the previous year's output at 107.7 mln tn. At 112.2 mln tn, wheat output in the country would reach a record high level.
Considering that wheat is sown from October and harvesting starts around April, the climatic disturbances have come at a crucial time for the cereal.
The day temperature started rising above normal in mid-February, with the maximum temperature in some wheat-growing areas going upwards of 39 degrees Celsius, nearly 10 degrees higher than normal, according to the India Meteorology Department.
Also worrisome is the weather bureau’s prediction that abnormal heat could be recorded in the three-month period between March and May, particularly in the wheat growing regions--a period that is crucial for wheat crop. It could result in early maturity of the crop and the resultant grains could be of poor quality.
Some part of the crops, sown later in the season, could also perish. In regions where harvesting has already begun, the effect is visible, according to reports.
While temperature stopped rising later, the current untimely hailstorms and rains have further aggravated the situation. For two weeks now, the IMD has been warning of rains and thunderstorm in a large number of regions and even issued advisories to farmers to harvest wheat in a hurry.
This looks like a repeat performance. Just a year ago, in 2022, heatwaves in March had badly affected India's wheat production. Although the government estimates put the 2022 wheat output at 107.7 mln tn, trade estimates were much lower at around 100 mln tn.
PRICES
Wheat prices in January had started rising, and according to data available with Agmarknet, a government set up, price in Kota mandi in Rajasthan was above 2,600 rupees per 100 kg, and on some days was nearly 3,000 rupees. The high price galvanised the government machinery, leading to announcement of auctions.
GOVERNMENT AUCTIONS
The government in February decided to release wheat in the open market through auctions from its stocks, under Open Market Sales Scheme-Domestic. Between Feb 1 and Mar 15, it conducted six weekly auctions, and released 3.38 mln tn of wheat at prices ranging from 2,173-2,474 rupees per 100 kg.
While announcing the auction programme, the government had said the process would continue until mid-March. So one may surmise that the auction programme has been concluded now. After conducting six successive weekly auctions, the government did not conduct any auction in the week started Monday. However, it seems to have kept its options open: while announcing the results of the sixth auction, it said wheat and atta prices are likely to remain stabilised “with the future tenders for open sale of wheat under OMMS(D).”
Wheat prices have come down in recent weeks to around 2,150 rupees per 100 kg because of the government auctions and also because arrivals of new crop started in some markets. But if they start rising again, will the government be able to meet this commitment?
The ability of the government to release stocks in the market was obviously limited by the fall in the stocks it held. As of Mar 1, the Food Corp of India held 5.02 mln tn of wheat in stock, while the state-level agencies had 6.64 mln tn. This stock of 11.67 mln tn was much lower than 23.4 mln tn a year ago, and a recent low. The government-prescribed norms for such stocks are 7.46 mlm tn as on the first of April, and 27.5 mln tn on Jul 1.
PROCUREMENT
Whether the government will have enough stock of wheat in months to come will depend on procurement, scheduled to begin in April. If the crop turns out to be much lower than estimated, as many traders fear, the government may have to pay high prices to farmers for procurement, leading to larger fiscal deficit and its consequences. The minimum support price for wheat in the current season is 2,125 rupees per 100 kg, but the government may end up paying much higher price.
The government is looking forward to procure around 34 mln tn of wheat from the open market this season, which looks like a tall order. Last year, it could procure only 18.79 mln tn of wheat as against 44.43 mln tn a year ago.
IS IMPORT AN OPTION?
With market putting the wheat output this rabi at 103-109 mln tn, the supply could be precariously close to estimated annual consumption of around 104 mln tn. To keep prices at reasonable levels, stocks with the government would be crucial. While the government has already banned wheat export, it has yet to show willingness to import the grain to shore up its stocks.
The next few weeks, when arrivals gather speed, will be critical for the government to get a good idea about the crop. If it decides to import wheat, it may not be a difficult option, given the softness of global wheat prices. At $6.62 per bushel, the current global price of wheat on CBOT is much lower than $11.82 a year ago, when the Russian invasion of Ukraine had created a shortage of the grain. These two countries together account for nearly 40% of global exports of wheat.
However, the government firmly believes that the climatic factors currently being witnessed would not seriously impact wheat crop. Union Agriculture Minister Narendra Singh Tomar last week said there has not been any effect seen so far on wheat crop due to high temperatures and it will be too early to say about the likely impact. But, according to media report, he also added: "Weather-related challenges are always there in front of agriculture."
Touche.
End
US$1 = 82.25 rupees
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
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Informist, Friday, Mar 24, 2023
By Abhijit Doshi
MUMBAI - Recent communication by rating agency CRISIL's subsidiary about the damage to India's 2023 rabi crops is only the latest narration of the impact of climatic factors. Various agencies and economic commentators have articulated concern with uncertainty about output of various rabi crops, including wheat, one of the most important cereals in terms of consumption across the country.
A report by CRISIL Market Intelligence and Analytics, released Wednesday, said the ongoing harvest for rabi crops, including wheat, has been lashed by an untimely torrent, causing damage to rabi crops--some already harvested, some ready to harvest and some in the development stage.
WEATHER FACTOR
The unusual behaviour of weather, first abnormal heat in some regions and then unseasonal rains in some others, has created uncertainty about the size of wheat output this season. The government has estimated the cereal's output at 112.2 mln tn, 4.2% above the previous year's output at 107.7 mln tn. At 112.2 mln tn, wheat output in the country would reach a record high level.
Considering that wheat is sown from October and harvesting starts around April, the climatic disturbances have come at a crucial time for the cereal.
The day temperature started rising above normal in mid-February, with the maximum temperature in some wheat-growing areas going upwards of 39 degrees Celsius, nearly 10 degrees higher than normal, according to the India Meteorology Department.
Also worrisome is the weather bureau’s prediction that abnormal heat could be recorded in the three-month period between March and May, particularly in the wheat growing regions--a period that is crucial for wheat crop. It could result in early maturity of the crop and the resultant grains could be of poor quality.
Some part of the crops, sown later in the season, could also perish. In regions where harvesting has already begun, the effect is visible, according to reports.
While temperature stopped rising later, the current untimely hailstorms and rains have further aggravated the situation. For two weeks now, the IMD has been warning of rains and thunderstorm in a large number of regions and even issued advisories to farmers to harvest wheat in a hurry.
This looks like a repeat performance. Just a year ago, in 2022, heatwaves in March had badly affected India's wheat production. Although the government estimates put the 2022 wheat output at 107.7 mln tn, trade estimates were much lower at around 100 mln tn.
PRICES
Wheat prices in January had started rising, and according to data available with Agmarknet, a government set up, price in Kota mandi in Rajasthan was above 2,600 rupees per 100 kg, and on some days was nearly 3,000 rupees. The high price galvanised the government machinery, leading to announcement of auctions.
GOVERNMENT AUCTIONS
The government in February decided to release wheat in the open market through auctions from its stocks, under Open Market Sales Scheme-Domestic. Between Feb 1 and Mar 15, it conducted six weekly auctions, and released 3.38 mln tn of wheat at prices ranging from 2,173-2,474 rupees per 100 kg.
While announcing the auction programme, the government had said the process would continue until mid-March. So one may surmise that the auction programme has been concluded now. After conducting six successive weekly auctions, the government did not conduct any auction in the week started Monday. However, it seems to have kept its options open: while announcing the results of the sixth auction, it said wheat and atta prices are likely to remain stabilised “with the future tenders for open sale of wheat under OMMS(D).”
Wheat prices have come down in recent weeks to around 2,150 rupees per 100 kg because of the government auctions and also because arrivals of new crop started in some markets. But if they start rising again, will the government be able to meet this commitment?
The ability of the government to release stocks in the market was obviously limited by the fall in the stocks it held. As of Mar 1, the Food Corp of India held 5.02 mln tn of wheat in stock, while the state-level agencies had 6.64 mln tn. This stock of 11.67 mln tn was much lower than 23.4 mln tn a year ago, and a recent low. The government-prescribed norms for such stocks are 7.46 mlm tn as on the first of April, and 27.5 mln tn on Jul 1.
PROCUREMENT
Whether the government will have enough stock of wheat in months to come will depend on procurement, scheduled to begin in April. If the crop turns out to be much lower than estimated, as many traders fear, the government may have to pay high prices to farmers for procurement, leading to larger fiscal deficit and its consequences. The minimum support price for wheat in the current season is 2,125 rupees per 100 kg, but the government may end up paying much higher price.
The government is looking forward to procure around 34 mln tn of wheat from the open market this season, which looks like a tall order. Last year, it could procure only 18.79 mln tn of wheat as against 44.43 mln tn a year ago.
IS IMPORT AN OPTION?
With market putting the wheat output this rabi at 103-109 mln tn, the supply could be precariously close to estimated annual consumption of around 104 mln tn. To keep prices at reasonable levels, stocks with the government would be crucial. While the government has already banned wheat export, it has yet to show willingness to import the grain to shore up its stocks.
The next few weeks, when arrivals gather speed, will be critical for the government to get a good idea about the crop. If it decides to import wheat, it may not be a difficult option, given the softness of global wheat prices. At $6.62 per bushel, the current global price of wheat on CBOT is much lower than $11.82 a year ago, when the Russian invasion of Ukraine had created a shortage of the grain. These two countries together account for nearly 40% of global exports of wheat.
However, the government firmly believes that the climatic factors currently being witnessed would not seriously impact wheat crop. Union Agriculture Minister Narendra Singh Tomar last week said there has not been any effect seen so far on wheat crop due to high temperatures and it will be too early to say about the likely impact. But, according to media report, he also added: "Weather-related challenges are always there in front of agriculture."
Touche.
End
US$1 = 82.25 rupees
Edited by Akul Nishant Akhoury
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
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