India: Express view on domestic supply position on wheat: A Goldilocks moment
When farmers harvest a good crop for which they get remunerative rates, there is ample grain to meet the requirements of private millers and traders, and the government also procures enough to replenish its depleted stocks, it translates into a Goldilocks situation. That’s, indeed, the case with wheat. Last year, on April 1, stocks of the grain in government warehouses, at 7.5 million tonnes (mt), were the lowest for this date since 2008. With neither the government nor the trade having much wheat, wholesale prices in Delhi crossed Rs 3,200 per quintal this January, as against Rs 2,500 a year ago. During 2023-24 (April-March), open market sales of wheat from public stocks topped 10 mt. In 2024-25, such sales totaled just over 4 mt. Instead of trying to cool open-market prices through offloading of its stocks, the Narendra Modi government did otherwise. It conserved its stocks and let prices rise.
That stratagem has seemingly paid off. While opening public wheat stocks this April have been higher at 11.8 mt, the new crop has also turned out quite bumper. Government agencies are set to procure 30 mt-plus of wheat in the current marketing season (April-June), the highest in four years. This, even as wheat prices in Delhi have eased to Rs 2,450-2,500 per quintal, which is an indicator of robust market arrivals. In most mandis of major growing states, wheat is trading at just around the government’s minimum support price of Rs 2,425. That’s a fair reward for farmers. They were enthused to plant more area under the crop by good prices (the MSP was itself hiked by Rs 150/quintal, with Rajasthan and Madhya Pradesh offering Rs 150-175 bonuses on top) as well as adequate soil moisture and irrigation water availability. The absence of any significant weather shocks impacting yields further helped this time. Simply put, the precarious domestic supply position in wheat, since the March 2022 temperature spike-singed crop of that year, has changed to Goldilocks’s “just right”.
This unfortunately, isn’t so with rice, where government stocks of 63.1 mt on April 1 were more than 4.5 times the required 13.6 mt for that date. Unlike wheat — where production is concentrated in a few northern and central states, and is also vulnerable to climate-induced shorter and warmer winters — India is structurally surplus in rice. The latter is grown across a wider geography in almost all regions of the country and is a water-guzzling crop to boot. The need to limit its cultivation and shift acreages to other crops that consume less water and are in relatively short supply — maize, oilseeds and pulses — has been emphasised time and again. Concrete policy action in this regard can brook no further delay.
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