India’s wheat procurement slightly dips, but May inventories see increase

INDIA – According to government sources, India’s efforts to fortify its wheat reserves have steadily declined this year, with the country purchasing 25.4 million metric tons of new-season wheat from domestic farmers, marking a 1.55% decrease from the previous year.

Despite a sluggish start, the government-backed Food Corporation of India (FCI) has shown resilience in its wheat procurement efforts. According to undisclosed sources, recent weeks have witnessed a surge. 

However, trade and industry officials express concerns about India’s ability to meet its procurement target of 30-32 million tons, hinting at the possibility of the world’s second-largest wheat producer falling short yet again.

This shortfall in wheat procurement echoes similar challenges faced by New Delhi in 2022 and 2023, attributed to sudden temperature spikes that curtailed output. 

Subsequently, lower output led to a rise in domestic prices, compelling the FCI to sell a record-high quantity of over 10 million tons from its stocks to bulk buyers such as flour millers and biscuit makers. 

Consequently, wheat stocks in government warehouses plummeted to their lowest levels since 2008.

As of the start of April, wheat reserves in state stores stood at 7.5 million tons, down from 8.35 million tons a year earlier. Over the past decade, wheat stocks on April 1 averaged 16.7 million tons. 

However, after the FCI’s new season purchases, May witnessed an upsurge in wheat inventories compared to April.

India’s focus on replenishing wheat reserves aims to stabilize domestic prices, which have remained above the state-fixed minimum buying price since the last crop was harvested. 

As reported by Reuters last month, India urged global and domestic trade entities to refrain from purchasing new-season wheat from local farmers in a bid to support the FCI’s procurement endeavors.

India’s wheat imports to surge despite record crop

Earlier last month, a report from the Foreign Agricultural Service (FAS) of the US Department of Agriculture indicated that India is poised to witness a significant surge in wheat imports during the 2024-25 marketing year. 

This surge is driven by steady domestic demand, depleted government stocks, and favorable global prices.

The Global Agricultural Information Network (GAIN) report, released on March 29, projects India’s wheat production to reach 112.5 million tonnes for the upcoming harvest. This forecast surpasses the previous year’s record output of 110.5 million tonnes, which was attributed to favorable weather conditions throughout the planting and reproductive growth stages.

However, with consumption also expected to reach a record high of 113.5 million tonnes, wheat imports are projected to soar to 2 million tonnes, a substantial increase from the 2023-24 total of 120,000 tonnes, marking India as a net importer of wheat for the first time since 2017-18.

The FAS highlighted the challenges posed by depleted government stocks and weak global prices, necessitating reduced import duties to supplement domestic supplies. 

The government is unlikely to lift its export ban on wheat and wheat products, as emphasized by its focus on prioritizing domestic food security.

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