Wheat output in India is likely to hit a record high this year: NCML data

Wheat output in India is likely to hit a record high this year, pushed by a favourable climate and increase in government support prices, which encouraged more sowing.

Data compiled by National Collateral Management Services (NCML, a non-government body) shows a 6.3 per cent rise to 109 million tonnes (mt). The Union ministry of agriculture’s first advance estimate was 100.5 mt, as compared to 102 mt in last year’s fourth advance estimate.

Chart“Bountiful rains during the monsoon season have boosted the prospects in the ensuing rabi season. Higher acreage is reported due to increase in the MSP (minimum support price). Farmers prefer wheat over other rabi crops in irrigated areas because of assured return. Second, prolonged cold waves and winter rainfall in states that are key contributors in wheat have improved the yield,” said Siraj Chaudhry, managing director at NCML.

The government in October 2019 had announced an Rs 85 increase in wheat’s MSP to Rs 1,925 a quintal for the rabi season. This helped the sown area under wheat to 29.7 million hectares, from 26.27 mn ha last year.

“The record output is set to create storage problems for the government. Prices are likely to remain under pressure,” said Ajay Kedia, managing director, Kedia Commodity. Wheat is down seven per cent this month in the spot market, at Rs 2,166 a quintal. Naveen Mathur, director (commodity and currency) at Anand Rathi Shares and Stockbrokers, believes the record output might mean a price off Rs 1,900 a qtk in the medium term, marginally below the MSP.

To create space for the new crop, government-owned Food Corporation of India is selling at Rs 2,135 a qtl now as against Rs 2,245 earlier fixed for this quarter. Informed sources said the total cost of wheat procurement worked out to Rs 2,505 a qtl for FCI, making it a nearly 15 per cent discount sale. Wheat inventory at FCI’s godowns is around 33 mt; the buffer stock requirement is 10.7 mt.