Grain Market Dynamics: Wheat Prices Plummet by ₹128/quintal in FCI Auction Surge

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Grain Market Dynamics: Wheat Prices Plummet by ₹128/quintal in FCI Auction Surge
Credit: © Reuters.

Wheat prices hit a 2-1/2 month low at FCI auctions, sliding by ₹128/quintal due to a 33% surge in government offerings. Despite tightened stock norms, FCI sold 3.47 lakh tonnes, raising concerns as the total sales since June 28 approach 48.12 lt. Bidding prices across states dropped, signaling a shift in market dynamics. With the government contemplating an additional 25 lt release, the wheat market faces both challenges and opportunities.

Highlights

Wheat Prices Decline in OMSS Auctions: Wheat prices at the Food Corporation of India (FCI) weekly open market sale scheme (OMSS) auctions dropped by ₹128 per quintal. The average selling price reached ₹2,172.94/quintal, the lowest since September 27, down from ₹2,301.36 in the previous round.

33% Increase in Offering: The government increased the offering in the sale by 33%, resulting in the decline in wheat prices. FCI sold 3.47 lakh tonnes (lt) of wheat out of 4 lt offered in the open market through e-auction.

Total Sales Since June 28: Since sales of wheat from government reserves began on June 28 under OMSS to control domestic prices, the total quantity sold reached nearly 48.12 lt.

Tightened Stock Holding Norms: Stock holding norms for all stakeholders have been further tightened to ensure sufficient availability in the market.

Additional Release of Wheat: Food Secretary Sanjeev Chopra mentioned the possibility of an additional release of 25 lt of wheat over and above the 101 lt already allocated for the open market sale scheme (OMSS) if needed.

Regional Variation in Bidding Prices: The highest bidded prices in various states saw reductions - Maharashtra (₹2,400 from ₹2,475), Madhya Pradesh (₹2,450 from ₹2,490), Uttar Pradesh (₹2,370 from ₹2,590), and West Bengal (₹2,325 from ₹2,400).

Price Trends in Different States: The highest bidding price in Karnataka increased from ₹2,575 on November 15 to ₹2,825 on December 13. In Rajasthan, it increased to ₹2,525 from ₹2,500 on December 6, in Gujarat to ₹2,250 from ₹2,220, and in Punjab to ₹2,660 from ₹2,570.

MSP Increase for Next Rabi Marketing Season: The government increased the minimum support price (MSP) of wheat for the next rabi marketing season (April-March) to ₹2,275/quintal from ₹2,125 in the 2023-24 season.

Speculation of Further Price Increase: There was speculation of further increase in market rates after the BJP won polls in three states, as the party promised to pay the states' farmers ₹2,700 for wheat.

Conclusion

The recent plunge in wheat prices at FCI auctions, influenced by increased government offerings and tightened stock norms, reflects a complex interplay of market forces. While reduced bidding prices may be a concern, the potential for an additional release of wheat introduces an element of flexibility. Stakeholders must closely monitor these evolving dynamics to navigate the fluctuating wheat market successfully.

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