There Is Uncertainty Of Prices As New Wheat Arrive The Market 

Mintec Global
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Excessive Government Control

As the annual wheat season arrives, traders and millers find themselves in a quandary. The government’s decision to cease the open market sales scheme (OMSS) during procurement has stirred concerns among flour millers and traders in the north. Excessive government controls aimed at maintaining artificially low prices are leaving market participants uncertain about the trajectory of wheat prices this year.

Uniform Reserve Prices and Disruptions in Normal Economics

The government’s strategic moves have disrupted the traditional demand-supply scenario. This move includes extending the export ban and directly selling wheat flour to consumers through cooperatives Nafed and NCCF. By maintaining a uniform reserve price across the country through weekly e-auctions, the Centre’s intervention has created a level playing field but at the cost of unsettling market norms. The imposition of a stock holding limit until March 31 adds another layer of complexity. While the intention is to control prices within a specific band, the impact on the normal demand-supply economics is raising apprehensions. Such controls, once lifted, may lead to unforeseen consequences, as per the sources.

Market Arrival Challenges and Procurement Status

With wheat arrivals beginning in Madhya Pradesh and other states, the government’s decision to halt weekly e-auctions under OMSS from March 1 in states where procurement starts is a pivotal development. Uncertainty looms as farmers, stockists, and processors grapple with the unknowns of the upcoming wheat production. Fear of potential stock limit orders has both stockists and processors treading cautiously in their buying strategies.
The former secretary of the Roller Flour Millers’ Federation of India explains, “No one knows what the wheat production will be. Even if it is a bumper crop, the government is pressured to buy as much as possible in the middle of a depleting Central Pool stock.” The announcement of Uttar Pradesh initiating wheat procurement from March 1 adds to the complexity, with the Centre keen on starting procurement in states during the first fortnight of March.

Market Trends in Arrival States

Wheat arrivals in Madhya Pradesh’s wholesale shop have touched close to one lakh tonnes in the past week, with varying prices across regions. While the average price surpassed the minimum support price in most shops, local variations and moisture content impacted prices in certain areas. Gujarat reported arrivals exceeding 25,000 tonnes, with Junagarh leading at 11,560 tonnes. These statistics explain against the backdrop of the government selling nearly 9 million tonnes of wheat to processors in the past eight months under OMSS.

Conclusion

In conclusion, the influx of new wheat arrivals brings a cloud of uncertainty to the market. While aiming to stabilize prices, government interventions have disrupted traditional supply trends, leaving traders wary.