April 9, 2007

 

High prices may prevent India's FCI from procuring enough wheat

 

 

Despite the announcement of an Rs.100 bonus for the wheat Minimum Support Price, the Food Corporation of India (FCI) is not confident of procuring enough wheat as it fears farmers would sell their yield to private companies for a better price.

 

The prices of wheat per quintal would cross the 1, 000 rupee mark as many farmers are not selling their yield for less than this, officials said.

 

According to market sources, farmers in Punjab and Haryana, the two major producers of wheat, are getting 1, 000 rupees per quintal for their crops, and companies like ITC and Cargill are keen to acquire their produce.

 

Officials in the Ministry of Food and Public Distribution doubt the Government's ability to meet the stipulated wheat procurement targets and this in turn, may lead to higher wheat prices.

 

Officials expect wheat prices would cross the Rs.1, 000 per quintal mark as the private companies are luring farmers with better prices.

 

Agriculture Minister Sharad Pawar's announcement that India could import wheat came quite early, and this might lead to a further rise in prices in the international market, the officials added.

 

Last year too, wheat prices soared in phases when the decision for its import was announced.

 

On the other hand, the February 28 ban on the futures of wheat has not resulted in a softening of prices.

 

The Chief Business Officer of National Commodity and Derivative Exchange (NCDEX), Narendra Gupta said the banning of futures would not help as the international prices of wheat are rising. Moreover, countries like the US are importing wheat for cattle feed as prices of corn and soy have risen.

 

Meanwhile, the Centre had announced that the National Agricultural Cooperative Marketing Federation (NAFED) would for the first time procure wheat on behalf of the FCI.

 

NAFED would procure wheat in non-traditional areas of Rajasthan, Madhya Pradesh, Uttar Pradesh, and Maharashtra with purchases expected in eight to ten days.

 

According to the second advance estimates of the Agriculture Ministry, wheat production in the current season is expected to be around 72.5 million tonnes, against 69.5 million tonnes the previous season.