Latest inflation data sparked action to tame wheat prices

NEW DELHI: Last week’s high retail inflation numbers and the feedback that millers were getting wheat from traders for just three days, after which prices were raised, has pushed the government into action to rework its policy, including export curbs, as it sought to check the build-up of inflationary expectation in the crucial commodity.
“We were getting inputs from multiple sources, including consumers and small traders. All of them were complaining of prices rising on an everyday basis,” a government official told TOI. What seems to have clinched the issue was a recent meeting with wheat flour millers, who complained that against a stock of around a fortnight, the traders who were keeping large stocks with them were releasing grains only for around three days in the expectation that prices will rise during this period.
Based on exports of around 14 lakh tonnes in April, market players had begun projecting shipments out of the country to hit 160-170 million tonnes this year, an official said. “We would have run short of grains, if this trend had continued. Traders and farmers were also holding their stocks in the hope of realising better prices. Rise in wheat prices impact costs of bread, biscuits and other items,” said Anjani Agarwal, president of the Roller Flour Millers’ Federation of India.

Not surprisingly, average retail prices went up 2.5% in just a week, while atta (wheat flour) became nearly 1.5% more expensive. Nationally, compared to last year wheat prices were 19.3% higher, with a huge variation across regions. South India saw a sharp 33% spike.
With global prices of wheat increasing to over $450 a tonne from around $350-360 a tonne when the Ukraine war began, private traders started procuring large quantities from farmers, who opted for higher prices compared to the MSP offered by government agencies that were procuring.
What added to the price pressure was a global scarcity as Ukraine and Russia withdrew from the market, and the early onset of summer accentuated the crisis. Besides, countries such as Argentina, Kazakhstan, Hungary, Bulgaria and Turkey either banned exports or imposed other restrictions. While procurement was lower, a dip in production added to the supply pressure.

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