Wheat Prices Surge Despite Bumper Harvest: What’s Fueling the Market?

Current Market Scenario

The wheat market is currently experiencing high prices despite a significant production increase. Over the past month, both government and non-government entities have been actively procuring wheat, which has contributed to the price surge. Last week, wheat prices were recorded at Rs 2500 per quintal, which has now risen to Rs 2530/2535 per quintal. This trend indicates limited scope for price reduction due to continuous procurement activities across several states including Madhya Pradesh, Rajasthan, Haryana, Punjab, and Uttar Pradesh.

Price Stability and Fluctuations

Price Increase: Wheat prices have increased by approximately Rs 70-100 per quintal over the last 14 days across major trading centers.
Market Stability: Prices are expected to remain steady to firm due to supply constraints and strong domestic demand.
Price Fluctuations: As long as government procurement continues, prices are likely to fluctuate within a range of Rs 30-40.

Fig.1

Government Procurement Status

The government has procured 262.4 lakh tons of wheat so far, slightly higher than last year's 262 lakh tons but short of the target of 300-310 lakh tons.

Despite a bumper harvest, the procurement may fall short of the target, potentially affecting future price stability.

Fig.2

Supply and Demand Dynamics

Supply Constraints: Current supply constraints are supporting the price stability across major centers.
Domestic Demand: Good domestic demand is further bolstering the prices.
Procurement Impact: Ongoing procurement by both government and private sectors is reducing the available wheat in the market, thus maintaining higher price levels.

Future Trends and Expectations

Price Trends: Wheat prices are expected to continue fluctuating within a narrow range due to the ongoing procurement activities.
Procurement Impact: As long as procurement by the government and private sectors continues, prices are unlikely to see significant reduction.
Market Stability: The market is likely to remain stable with occasional firming up of prices due to supply-demand dynamics.

Conclusion

The wheat market is currently experiencing high prices driven by active procurement despite a bumper harvest. The government's procurement, though slightly above last year’s figures, may still fall short of its ambitious target, potentially keeping prices elevated. Traders and stakeholders should anticipate continued price stability with minor fluctuations influenced by ongoing procurement activities and robust domestic demand.

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