February 26, 2010

India's higher wheat crop projections may pose storage problems

The country is expecting a record harvest of wheat crops at 82 million tonnes, and if this is realised, the most critical problem is going to be procurement and storage.

The buffer stocks of wheat are already close to 20 million tonnes, almost five times the minimum stock norms for this time of the year.

The storage capacity of the Food Corporation of India (FCI) is nearly full with existing stocks of wheat and rice – 43 million tonnes against the total capacity of 50 million tonnes. There are already complaints of against the FCI for storing precious grains in the open, under cover and plinth (CAP) method. Currently, over six lakh tonnes are said to be under CAP, exposing the grain to damage, theft and quality deterioration.

As the wheat procurement season is only weeks away and the FCI has targeted about 24 million tonnes, it is going to be a logistics nightmare to buy and store large quantities of harvested wheat.

If FCI is unable to keep pace with the anticipated large-scale arrivals, prices are likely to crash. Worse, wheat growers in states other than Punjab and Haryana may find little support from FCI, making them worse off than their counterparts.