Wheat output estimate gap raises speculation concern

By Sandip Das

The projections of wheat output by the agriculture ministry and the processing industry vary by more than 5 million tonne this crop year, with trade sources fearing that such a difference may lead to speculation in the market, thereby price rise.

Though the variance in estimates is not new, traders say that it often leads to market imbalance. In the past three years, the government’s estimates have been higher by 5-8 million tonne (MT) compared with figures projected by flour millers.

For the 2024-25 crop year (July-June), the agriculture ministry has projected a wheat output of record 115.4 MT and the processing industry 110 MT. This season, harvesting of wheat has begun last week.

“The difference between industry estimate and the agriculture ministry’s projection has narrowed this year,” a flour miller said.

Trade sources said the wide variation in government and industry estimates began in the 2021-22 crop year , when excessive heat just prior to the harvest in March had impacted yields. The government had then estimated wheat production at 107.7 MT, while the processing industry pegged it much lower. India has imposed a ban on wheat exports since 2022.

Navneet Chitlangia, president, Roller Flour Millers Federation of India, said the annual domestic usage of wheat, including requirements for seeds and processing, is estimated at 102-103 MT. Considering the output estimates and the domestic requirements, prices of wheat will be stable this year, he said. Inflation in wheat last month was 9.17% year-on-year.

According to a senior official, the ministry’s wheat output estimates  over the years were based on average yield and the areas under cultivation as reported by states.

According to an official note, the rabi crop output projections “are subject to change in the successive estimates on the receipt of better yield estimates based on crop cutting experiments.”

Since the 2024 kharif season, the government has launched digital crop surveys using technologies to generate “robust” crop production data.

The agriculture ministry had estimated wheat output in the 2023-24 crop year at 113.29 MT, while the flour millers had estimated a grain output of 106 MT.

The new crop harvest in the current year has begun in Gujarat, Madhya Pradesh and Rajasthan, while harvesting of wheat will commence in Uttar Pradesh, Punjab and Haryana in the next couple of weeks.

Officials said a robust harvest this year is expected to bolster the buffer, while the government has set a target of 31 MT of wheat procurement for 2025-26 rabi marketing season (April-June) from farmers.

As on Sunday, the Food Corporation of India (FCI) has 12.42 MT of wheat stock against the buffer of 7.46 MT for April 1. The FCI has sold around 3 MT of wheat in the open market through weekly auctions in the current fiscal.

This article has been republished from The Financial Express.