Will There Be Any Respite From Fluctuating Wheat Prices In 2023?

The wheat market in India has experienced a series of price fluctuations over the past year due to various factors. From a heatwave in March 2022 that impacted the growth of wheat to export bans on wheat and wheat flour, the Indian wheat market has been through a rollercoaster ride. In this article, we will explore the recent developments in the Indian wheat market and the government’s efforts to manage the situation.

Factors Impacting Wheat Prices

Here are the factors that influenced wheat prices:

• Heatwave’s Impact- In the 2021-22 crop year, the Indian government reported that the total wheat production was 107 million tons, which fell short of the estimated target of 112 million tons. The lower production was attributed to a heatwave that occurred in March 2022, which adversely affected the growth stage of wheat. As a result, the production was impacted, and the final yield fell short of the estimated target.
• Price Surge And Export Ban– The surge in wheat prices in India began in April 2022, driven by export demand and supply shortage. However, the government banned wheat exports on 13 May 2023 due to concerns over domestic supply, food security, and inflation. This led to a sharp 10%-12% decline in the wheat market, with prices approaching the Minimum Support Price (MSP) in most mandis. After a brief period of stability, the prices started to increase again in June 2022-July 2022, with a slight rise of 3%-4%.

Government’s Efforts To Control Wheat Prices

To tackle the situation, the Indian government has taken the following steps:

• Open Market Sale Scheme- To address the steep price rise of wheat and wheat-processed items such as atta and maida, the government of India (GOI) and Food Corporation of India (FCI) implemented the Open Market Sale Scheme (OMSS) of wheat in January 2023. The OMSS reserved 50 lakh tons of wheat for sale, with FCI mandated to sell 45 lakh tons of wheat through weekly e-auctions in the open market until 15 March 2023. The government’s efforts were successful, as evidenced by a 15%-18% reduction in wholesale prices.
• Ban On Prohibited Category- To manage the situation, an export ban on wheat flour was implemented in August 2022. The Director General of Foreign Trade (DGFT) banned processed food items made from wheat, such as atta, maida, semolina, and whole mill atta, and classified them as a ‘Prohibited Category.’ The ban on processed wheat products did not significantly help to control the increase in wheat prices, which continued to rise and eventually peaked at 30000-32000/MT in various regions.

OFB’s Insight

With the fresh crop procurement underway since 1 April 2023, wheat prices in India are anticipated to remain stable or slightly firm in the coming months of May 2023-June 2023. However, the ban on wheat exports will not be lifted. The government has set a procurement target of 34.2 million tons for the marketing year 2023-24, substantially higher than the 19 million tons procured in 2022-23. While the government predicts total wheat production of around 112 million tons, market sources estimate production to be between 105 million tons-107 million tons due to significant damage caused by excessive rainfall in several key wheat-producing states. 

Read more: Rain And Grain: What Is 2023 Rabi Season Wheat Procurement Challenge, Weather Impact, And Way Forward In India?

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