Wheat production may face terminal heat stress again: Report
1 min read . Updated: 28 Feb 2023, 05:32 PM IST
PremiumHeat waves during March last year had forced the government to ban wheat exports to ensure food security in the country
Wheat output may again face "terminal heat stress" which could result in lower production than official estimates, India Ratings on Tuesday said, expressing concern over production of the foodgrain amid prevailing warmer than usual temperatures in February.
Heat waves during March last year had forced the government to ban wheat exports to ensure food security in the country. Besides, the government has begun offloading wheat in the open market to curb price rise.
“Prevailing temperature so far in February 2023 is again higher than the normal and is indicating that wheat production, like 2022, may again face ‘terminal heat stress’. This may result in the wheat output falling to 107.7 million tonnes (MT) as against the second advance estimate of 112.2MT," India Ratings said in a statement.
On average, the maximum temperature in Punjab, a key wheat-growing area, has been 4°C to 5°C higher than the normal during 17-23 February 2023, the ratings agency warned.
Notably, Consumer Price Index (CPI) inflation accelerated to a three-month high in January driven by a spike in food prices. Inflation based on the CPI hardened to 6.52% in January, after declining to a one-year low of 5.72% in December.
Ind-Ra believes that so long as the arithmetic of wheat production, wheat procurement and domestic demand are not in alignment and the market continues to believe that the ability of the government to intervene in the market is limited due to the lower wheat stock, wheat prices are expected to remain elevated.
The rating agency thus expects the wheat stock in March 2023 to drop to 13.4MT before going up to 51.3MT in July 2023 if the average procurement to production ratio of FY18-FY22 holds. Yet, this will be about 9MT less than the wheat stock in July 2021.
“The inkling that ‘terminal heat stress’ may again impact the FY24 wheat procurement season appears to have already reached market participants. Thus, to cool-off wheat prices, the union government has lately released 1.8MT of wheat under the Open Market Sale Scheme in three e-auctions," the agency further added.
The union government earlier this month said that Food Corporation of India (FCI) may offload additional quantities of 20 LMT of wheat in open market under OMSS (D) 2023 for sale through E-auction to bulk buyers of wheat products like previous years.
“Thus, so far 50 LMT of wheat have been decided to offload under OMSS (D), 2023.The reduction in reserve price along with additional offloading of 20 LMT of wheat will collectively help in reducing market price of wheat and wheat products for consumers," the ministry stated.
The rating agency further stressed that the average monthly rate at which wheat stock declined during August 2021 and February 2022 was 4.6MT, but it declined to about 2.0MT during August 2022 and February 2023, as the government reduced the allocation of wheat under PMGKAY.
