India's rushed decision to ban wheat exports with immediate effect, citing food security issues, might be costly to the country's farmers. Many have held off on harvesting their crops in the hopes of greater prices in the coming weeks. Wheat mandis (wholesale markets) have dropped by Rs 50-100 a quintal on average since the morning of May 14, 2022, as a result of this decision.
"This notification has caused some anxiety. Wheat prices in Indore and Bihar mandis dropped by Rs 100 after the decision. Traders have likewise reduced their purchases. This is a decrease of Rs 125 per quintal. According to Shlok Joshi of Mandi Central, an agriculture commodity information portal, a Rs 50-100 drop has been noticed on average.
Farmers in the key wheat-producing regions of Punjab, Madhya Pradesh, Haryana, and Uttar Pradesh have been stockpiling their harvest and bringing it in instalments in the hope that wheat prices will continue to rise in the coming days.
The wheat ban, according to experts, was a knee-jerk reaction by the Union government. They pointed out that the government had just announced on May 12 that it will send trade teams to Morocco, Tunisia, Indonesia, the Philippines, Thailand, Vietnam, Turkey, Algeria, and Lebanon to investigate ways to expand wheat exports from India.
India had wanted to sell 10 million tonnes of wheat to take advantage of the worldwide market created by Russia's invasion of Ukraine. It predicted a record-breaking output of 111 million tonnes. The unexpected move comes as government wheat stocks are expected to fall.
The fall was caused by low wheat production as a result of high temperatures in March that caused wheat grains to shrivel, reducing crop quantity. Farmers also avoided government procurement this time because private trade offered them higher rates.
"The government estimated that 110 million tonnes will be produced. However, it appears that production is currently less than 100 million tonnes. "A big factor behind this decision is a drop in output of more than 10 million tonnes," said Mohit Upadhyay, a large wheat trader.
This year's procurement data are at a 15-year low, with only 18 million tonnes purchased so far in the 2022-23 marketing season, compared to 43.3 million tonnes in 2021-22. April and May are the busiest months for government procurement.
According to Upadhyay, a lot of stockpiling happens even at the end of businesses that haven't dealt in a long time. "Since wheat prices were so high, companies like Reliance, Aditya Birla, and others that weren't previously involved in wheat began to buy it." Mills were unable to handle wheat due to active wheat stockpiling, he explained.
According to experts, the administration must have realised that production was far lower than expected. However, the abrupt move may cause panic buying, resulting in lower prices for farmers.
Farmers may now be required to sell to government procurement agencies at MSP, which is far less than what they were previously receiving. According to experts, the market's reaction to this in terms of the price situation will be obvious in a few days. The ban, according to agriculture policy expert Devinder Sharma, will not affect farmers because the peak wheat marketing season has passed.
