The Lowest wheat procurement in 15 years: UPSC Daily Important Topic | 13 May 2022
The Lowest wheat procurement in 15 years-
✓From an all-time high last year, procurement of wheat is set to hit a 15-year low this season, falling below existing stocks for the first time.
● Current Procurement Scenario:
✓The 18.5 million tonnes (mt) likely procurement this time will be the lowest since the 11.1 mt bought in 2007-08.
✓This is the first time that wheat procured from the new crop (18.5 mt) is less than the public stocks at the start of the marketing season (19 mt).
● Reason for low Procurement:
✓2 main reasons for procurement plunging to a 15-year-low this time –
∆1.Export Demand:
✓In 2021-22, India exported a record 7.8 mt of wheat.
✓Supply disruptions from the Russia-Ukraine war have led to skyrocketing prices and a further increase in demand for Indian grain.
✓Indian wheat getting exported at about $350 or Rs 27,000 per tonne free-on-board (i.e. at the point of shipping)
✓The farmers are realising well above the minimum support price (MSP) of Rs 20,150/tonne at which the government is procuring.
∆2.Lower Production
✓The sudden spike in temperatures from the second half of March has taken a toll on yields.
✓In most wheat-growing areas farmers have reported a 15-20% decline in per-acre yields.
✓A smaller crop, in combination with export demand, has resulted in open market prices of wheat crossing the MSP in many parts of India.
✓The shorter the distance to the ports, the higher the premium that exporter/traders have paid over the MSP.
✓Many farmers are holding back their crops.
✓Such “hoarding” by farmers was seen in the recent past in soyabean and cotton, too, again driven by soaring international prices.
● Availability at Government level:
✓With opening stocks of 19 mt and expected procurement of 18.5 mt, government agencies have 37.5 mt of wheat available for 2022-23.
✓The normative buffer or closing stock requirement for March 31 is 7.5 mt.
✓Pradhan Mantri Garib Kalyan Anna Yojana scheme
✓The last two years have also witnessed substantial offtake under the scheme.
✓10.3 mt in 2020-21 and 19.9 mt in 2021-22
✓Open market sales to flour mills (2.5 mt and 7.1 mt, respectively).
✓One can expect wheat prices to firm up and a rerun of what happened in 2006-07 and 2007-08.
● Conclusion:
✓The relatively tight supplies in wheat this time is compensated for by the comfortable public stocks of rice. A good monsoon should further augment availability from the ensuing kharif crop and tide over the shortages in wheat.
● Prelims Takeaway:
✓Wheat procurement by the government
✓Pradhan Mantri Garib Kalyan Anna Yojana scheme
✓Export Demand of wheat