Indian wheat prices hit a record high on Monday due to dwindling supply and strong demand from flour mills struggling to land the grains needed to operate at full capacity, industry officials said to Reuters.
The record prices are likely to push up retail inflation, which slowed in November after hitting a 14-month high in October, and could influence the central bank’s decision on interest rate cuts.
“There is limited supply of wheat in the market. Even after paying record prices, flour mills are unable to land enough wheat to operate at full capacity,” said Ajay Goyal, managing director of Shivaji Roller Flour Mills.
In December, New Delhi lowered the limit on wheat stocks that traders and millers can hold in order to increase availability of the grain and moderate prices.
But the restrictions have failed to bring down prices, which were trading around 33,000 rupees ($384.66) per metric tonne in New Delhi, down from 24,500 rupees in April and well above the minimum price of support set by the government at Rs 22,750 for last season’s harvest.
Limiting stocks has failed to improve supply and lower prices, indicating that private players hold few stocks and the government needs to sell more wheat from its reserves to consumers, said Pramod Kumar, a miller.
The state-run Food Corporation of India (FCI) sells 100,000 tonnes of wheat to consumers in bulk every week, but this is not enough to meet demand as sales by private players are falling, a Mr. Kumar said.
In November, the government announced plans to sell 2.5 million tonnes of wheat from state reserves to bulk consumers in the year ending March 2025. This figure is significantly lower than around 10 million tonnes sold during the previous season.
The surplus of wheat with the FCI is limited, preventing it from offering more to private players, said a New Delhi-based trader with an international trading house.
Wheat stocks in state warehouses stood at 20.6 million tonnes at the start of December, slightly higher than the previous year’s 19.2 million tonnes, but well below the five-year average of 29.5 million tonnes.
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