India urges traders to avoid purchasing new-season wheat from farmers.

To replenish its dwindling reserves, the Indian government has advised both global and domestic trade entities to refrain from procuring new-season wheat directly from local farmers. The move aims to support the Food Corporation of India (FCI) in procuring significant quantities of wheat to stabilize its reserves, which have been depleted due to various factors.

India, being one of the largest consumers and producers of wheat globally, imposed a ban on wheat exports in 2022. The country is now striving to bolster its wheat stocks and mitigate surging prices caused by adverse weather conditions affecting wheat output in recent years.

Rising wheat prices compelled the government to release record amounts of wheat into the market to meet domestic demand, resulting in a decline in reserves crucial for the nation’s extensive food welfare program, benefiting nearly 800 million individuals.

According to sources, the government has urged private traders to abstain from participating in wholesale markets where farmers typically sell their produce to FCI or private entities. This informal directive, not issued since 2007, primarily targets purchases during April, as wheat procurement tends to decline after mid-May.

Traders active in India’s grain markets, including major global players like Cargill Inc, Hindustan Unilever Ltd, Louis Dreyfus Company, and Olam Group, are expected to adhere to the government’s guidance to prevent potential repercussions such as restrictions on wheat holding limits.

Furthermore, to prevent hoarding and price escalations, New Delhi has instructed traders, major retailers, and food processors to report wheat stocks weekly starting from April.

In 2023, FCI fell short of its wheat procurement target, acquiring 26.2 million metric tons instead of the intended 34.15 million metric tons. Consequently, wheat inventories in government warehouses plummeted to 9.7 million metric tons by March, the lowest since 2017.

Despite lower inventories, the Indian government has refrained from importing wheat, as such actions may antagonize local farmers, especially ahead of the parliamentary elections commencing on April 19.

However, with lower wheat stocks, India might be compelled to import 2 million metric tons of wheat this year, according to a United States Department of Agriculture report.

FCI is prioritizing procurement in Uttar Pradesh, a significant wheat-producing state historically contributing minimally to FCI’s procurement. Uttar Pradesh authorities have been directed to curtail large-scale wheat purchases by big traders, aiming to streamline procurement processes and ensure fair distribution.