In recent years, wheat prices have soared to unprecedented levels, prompting the government to implement several measures to control the surge. The government had been attempting to initiate the Open Market Sale Scheme (OMSS) since August; however, it was only successfully launched in December.
In the first tender held on December 11, 100,000 tonnes of
wheat were offered, out of which 99,815 tonnes were sold. Another tender held
on the 26th, an offer of 100,000 tons of wheat was made, out of which 99,465
tons were sold, where another 100,000 tonnes of wheat will be offered on
January 1st. The quantity of wheat to be sold under the OMSS is likely to
increase in January.
Last year, 3.50 lakh tonnes of wheat were sold in the second
week of December, whereas this year, not even half of that quantity has been
sold so far. More risk-taking traders have remained in the market for a few
more weeks, while cautious players have exited at every price rise. Considering
the anticipated price increase, it would be prudent to book profits before
January.
If the government intended to increase the volume of sales
under OMSS, it would not have reduced the stock limit further. By deciding to
reduce the stock limit, the government has indicated that the volume of sales
under OMSS will not increase before January. It is advisable to receive profits
on every price rise.
In the beginning of this month, Centre revises Wheat Stock
Limit for Traders/ Wholesalers, Retailers, Big Chain Retailers and Processors.
The stock limits on wheat were first imposed on June 24 and
later revised to tighten the norms on September 9 in order to manage the
overall food security and to prevent hoarding and unscrupulous speculation. So
far, decisions like wheat stock limit have not been very effective in
stabilizing prices in the market. This indicates that the government will have
to consider new measures.
Import Duty and Domestic Supply: Currently there is a 40%
import duty on wheat, which makes imported wheat expensive. If the government
removes this duty and allows import at zero duty, then the import of 30-40 lakh
tonnes of wheat can stabilize the domestic supply, thereby controlling prices.
If wheat imports are allowed in the coming months, it can increase domestic
supply. If the government does not decide on imports, it may be difficult to
control wheat prices, as there is still four months for new wheat to arrive.
During this time prices may increase.
In the past four weeks, Lawrence Road market has broken the level of 3,060 four times as shown in the graph below. As per our sources, wheat prices in Delhi may reach Rs 3200 to Rs 3300 per quintal in the coming time.
Area and percentage to All India, Rabi Season, (2022-23 to 2023-24)
STOCK & PROCUREMENT:
As of Nov 2024, Wheat stock is 222.64 LMT, against the buffer norm of 205.20LMT
As 2024 draws to a close, the global wheat market's
attention is primarily focused on developments in Ukraine, Russia, and the
Middle East. Political and economic developments in these regions have caught
the attention of traders, but market activity has remained limited due to
adequate supply for consumers.
USDA’s latest projections of global wheat production are
revised upwards to 792.9 million metric tons (MMTs) tons in 2024-25.
Production in the current year is projected to be 1.7 MMTs
higher compared to 2023-24. China is the largest producer with 140 MMTs of
production, followed by EU (121.3 MMTs) and India (113.3 MMTs).
In the current year, due to increased consumption, global
wheat ending stocks are projected to decrease further and are at their lowest
levels in the last 6 years. In the current year, production decline is reported
in key wheat exporting nations. Russian wheat production is down by 10 MMTs
year-on-year to 81.5 MMTs.
EU’s production is down by 14 MMTs. Production increase is
reported in Argentina and Australia.
As per global wheat price seasonality, in the last two
years, prices are at the highest in April/May, and increase thereof till
August, increasing slightly in September/October, and decline thereof.
According to the latest World Bank data, global wheat prices
in November 2024 averaged $254 per ton, which is 11 percent lower compared to
November 2023 when prices were $284per ton. Prices have also decreased month on
month when compared to October, when prices were $273 per ton.
Based on the domestic and international scenario, the wheat
market is expected to remain bullish in the coming months. Our research
indicates that the measures taken so far have not been effective in curbing the
rise in wheat prices. As a result, wheat prices in Delhi might reach the level
of ₹3200 in the near future. Those holding wheat stocks can consider holding on
to them, but they should closely monitor government activities.
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