By K Goyal and T K Abraham/Bloomberg
New Delhi: India’s wheat production this year may be boosted by recent rains in the main growing regions, exceeding the government’s target output and helping slow inflation that accelerated more than expected last week.
Production may surpass the 72.5 million metric tonnes forecast by the government last month, Agriculture Secretary P.K. Mishra told reporters in New Delhi on 20 March.
Higher wheat production in India, the world’s second- biggest grower, may help stem inflation that stayed above the central bank’s tolerance level of 5% since September. It may also reduce imports, likely cooling prices that have climbed 30% on the Chicago Board of Trade in the past year.
“A bumper crop will certainly take some heat off inflation,” Harish Galipelli, head of research at commodities brokerage Karvy Comtrade Ltd, said over phone from Hyderabad. “Prices should come down with the arrival of a new crop.” Galipelli expects prices to reach about Rs9,000 a tonne in the next two months from Rs11,060.
The agriculture ministry had made the wheat production forecast last month before rains and hailstorms improved the moisture level, boosting prospects of higher yield. The plantation area for wheat reached 28.5 million hectares (70.4 million acres) this month, 7% more than a year earlier, according to the ministry.
“The weather conditions are very good for the wheat crop,” Mishra said. “We are likely to cross the target.”
India’s winter crops are sown from October through December and harvested through April.
The country expects increased wheat supplies to ease inflation, Finance Minister Palaniappan Chidambaram said on 22 February. Inflation accelerated to 6.46% in the week ended 3 March , from 6.1% in the previous week, the Ministry of Commerce & Industry said on 16 March.
The Centre last week asked State Trading Corp. to take steps to import 3 million tonnes of wheat this year to bridge any shortfall in production of the grain. State-run firms and private traders imported 6.5 million tonnes of wheat last year after production fell to 69.35 million tonnes.
The government also increased the guaranteed price paid to growers this year to Rs850 ($19.3) per 100 kg to boost reserves of the grain and stem an increase in prices.
“The government may find it difficult to buy large quantities from farmers as open market prices are still above its offer,” said Kishore Narne, head of research at Mumbai- based Anand Rathi Commodities Ltd.
Wheat prices on the National Commodity & Derivatives Exchange Ltd had gained 26% in the 10 months to 28 February until the government banned futures trading in the grain. Wheat for March delivery traded at Rs1,106 per 100 kg in afternoon trading on 20 March.
The government allowed traders to import wheat duty-free until the end of the year, extending the 28 February deadline, to boost domestic availability of the grain, agriculture minister Sharad Pawar said last week.
The government may buy 15.15 million tonnes from this year’s crop, harvesting for which starts this month, compared with 9.23 million tonnes last year, State Food Minister Akilesh Prasad Sigh said on 2 March in response to a question in parliament.