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The Lowest wheat procurement in 15 years: UPSC Daily Important Topic | 13 May 2022

The Lowest wheat procurement in 15 years-

✓From an all-time high last year, procurement of wheat is set to hit a 15-year low this season, falling below existing stocks for the first time.

● Current Procurement Scenario:

✓The 18.5 million tonnes (mt) likely procurement this time will be the lowest since the 11.1 mt bought in 2007-08.

✓This is the first time that wheat procured from the new crop (18.5 mt) is less than the public stocks at the start of the marketing season (19 mt).

● Reason for low Procurement:

✓2 main reasons for procurement plunging to a 15-year-low this time –

∆1.Export Demand:

✓In 2021-22, India exported a record 7.8 mt of wheat.

✓Supply disruptions from the Russia-Ukraine war have led to skyrocketing prices and a further increase in demand for Indian grain.

✓Indian wheat getting exported at about $350 or Rs 27,000 per tonne free-on-board (i.e. at the point of shipping)

✓The farmers are realising well above the minimum support price (MSP) of Rs 20,150/tonne at which the government is procuring.

∆2.Lower Production

✓The sudden spike in temperatures from the second half of March has taken a toll on yields.

✓In most wheat-growing areas farmers have reported a 15-20% decline in per-acre yields.

✓A smaller crop, in combination with export demand, has resulted in open market prices of wheat crossing the MSP in many parts of India.

✓The shorter the distance to the ports, the higher the premium that exporter/traders have paid over the MSP.

✓Many farmers are holding back their crops.

✓Such “hoarding” by farmers was seen in the recent past in soyabean and cotton, too, again driven by soaring international prices.

● Availability at Government level:

✓With opening stocks of 19 mt and expected procurement of 18.5 mt, government agencies have 37.5 mt of wheat available for 2022-23.

✓The normative buffer or closing stock requirement for March 31 is 7.5 mt.

✓Pradhan Mantri Garib Kalyan Anna Yojana scheme

✓The last two years have also witnessed substantial offtake under the scheme.

✓10.3 mt in 2020-21 and 19.9 mt in 2021-22

✓Open market sales to flour mills (2.5 mt and 7.1 mt, respectively).

✓One can expect wheat prices to firm up and a rerun of what happened in 2006-07 and 2007-08.

● Conclusion:

✓The relatively tight supplies in wheat this time is compensated for by the comfortable public stocks of rice. A good monsoon should further augment availability from the ensuing kharif crop and tide over the shortages in wheat.

● Prelims Takeaway:

✓Wheat procurement by the government

✓Pradhan Mantri Garib Kalyan Anna Yojana scheme

✓Export Demand of wheat

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