For the first time in several years now, the wholesale price of wheat dropped sharply season, leaving the trade stranded with high-priced stocks and no buyers. Wheat prices crashed to Rs 555 a quintal from the procurement price of Rs 640 a quintal in June. There is a loss of Rs 100 a quintal which is likely to wipe out the net worth of most small millers and affect the credit worthiness of most medium sized companies operating on bank loans.
In Delhi, Devastated millers are watching helplessly as the open market prices of wheat plunged to historic lows with a ripple effect in Punjab and Haryana.
Traders said that further lows are a possibility as the market continues to remain bearish and traders are desperate to liquidate stocks as soon as possible. Normally, prices of most commodities, especially wheat and rice, rise as the year progresses and stocks diminish. But this year, the Centre’s sudden decision to slash the open market sale prices of FCI across the country has taken the bottom out of the market. Private traders, who believed FCI would not bring down its prices below the economic cost and procured wheat during the season, are now left with stocks rapidly losing value.
Most traders were banking on wholesale prices reaching Rs 900 a quintal by September, which would have been adequate to cover their interest and carrying costs. But the government in its haste to offload stocks queered the market. So now both FCI and traders are losing money. According to traders, the Centre ought to realise that though its new prices have suppressed the market, FCI is unlikely to actually offload quantities till privately-held stocks remain.
Given the advance payment terms and delivery schedules state by FCI and the speed money necessary to receive a consignment, buyers without question prefer to deal with private traders. Wheat, which FCI has priced at Rs 650, a quintal actually costs not less than Rs 670 to the buyer. In contrast, private traders are willing to accept any terms just to sell off stocks. So FCI sales will remain a non-starter till private traders continue to compete,"they added.
Traders say even the new scheme of giving free wheat for work will not improve the situation as most of the stocks will trickle back into the open market through indirect sales. "A drought next season is our only hope", they added.
Market
Update
(Food Grains)
