The war between Russia and Ukraine, the two major wheat exporting countries, is proving to be a boon in disguise for wheat-growing farmers. The wheat price in domestic and international markets has surged which is likely to hit the wheat procurement targets of the state government.
The UP government has set a target of procuring 60 lakh MT of wheat during the current Rabi marketing season. The procurement commenced from April 1 at the minimum support price (MSP) of Rs 2,015 per quintal fixed by the Centre. However, the prevailing market price of the commodity is hovering far more than MSP at over Rs 2,200 per quintal. The wheat price in the open market is likely to surge further in the coming weeks depending on the actual export from India. Presently the export is likely to be over 10 million MT.
The UP government has set up 6,000 procurement centres across the state to buy wheat from farmers during the Rabi marketing season. Although the government has hiked the MSP by Rs 40 this year from Rs 1,975 per quintal to Rs 2,015 per quintal, the prevailing market price is nearly 10 per cent higher than the MSP to be offered at the state-run procurement centres. As such, the state farmers are likely to gravitate towards big traders who offer more than the MSP.
Besides, the primary purpose of the MSP mechanism is to ensure that the farmers get a minimum price guarantee, and that they are able to weigh their options, if offered higher prices for their farm produce.
Together, Russia and Ukraine exports supplement 30 per cent of the global wheat shipments annually, with Russia accounting for the bulk of 18 per cent.
Their main wheat export destinations include Thailand, Turkey, Nigeria, Indonesia, Yemen and Egypt. Since the start of the war, the wheat exports from these two neighbouring countries have been impacted substantially owing to various factors, including sanctions, logistics, insurance, payments etc.
In such a dynamic scenario, Indian agro marketers and exporters are looking to fill the vacuum in the global wheat supply chain through aggressive procurement domestically as well as tying up with foreign entities. According to reports, India is eying 8-10 MT wheat exports in the current season if the Russia-Ukraine crisis persists.
Nonetheless, the UP food marketing department is drawing up an elaborate plan for a seamless procurement season, which plays a key role in communicating the pro-farmer policies of the state government. “The prevailing domestic wheat market prices are higher than the MSP, but institutional procurement is important in perking up demand and keeping the prices stable,” a department official said.
The Union Food ministry has indicated that a drop in wheat procurement volume is unlikely to impact grain allocation to the public distribution system under the National Food Security Act (NFSA). The government distributes 5 kg of rice or wheat to close to 81 crore beneficiaries under NFSA at Rs 3 and Rs 2 per kg, respectively.
