Introduction

  • The world wheat production in the recent years has been observed to be hovering between 560-580 million tons a year.
  • The biggest cultivators of wheat are EU-25, China, India, America, Russia, Australia, Canada, Pakistan, Turkey and Argentina. India, EU-25, China, and US, the four largest producers account for around 58% of the total global production. India is the world's second biggest wheat producer after China.
  • World wheat consumption is consistently growing with the growth in population, as it is one of the major staple foods across the world. The major consuming countries of wheat are EU, China, India, Russia, USA and Pakistan.

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Factors Influencing Wheat Markets

  • Crop size.
  • Crop conditions.
  • The level of surplus or shortfall.
  • Agricultural and economic policies in the country and abroad.
  • Worldwide demand for wheat.
  • Domestic flour milling needs.
  • The relative strength of the currency .

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The basics of wheat economics

  • When supplies of a commodity are excessive, prices decline. When demand for the commodity increases, so does the price.
  • Typically, companies invest from 5% to 7% of their gross revenues to product promotion.
  • Individually, wheat farmers have little impact on demand, but putting all the heads together can make a significant difference in product demand and market price. And that leads to the ultimate goal of the improved income for wheat producers.

Wheat Economics

  • Harvested wheat grain is classified according to grain properties for the purposes of the commodities market.
  • Wheat buyers use the classifications to help determine which wheat to purchase as each class has special uses.
  • Wheat producers determine which classes of wheat are the most profitable to cultivate with this system.
  • Wheat is widely cultivated as a cash crop because it produces a good yield per acre, grows well in a temperate climate even with a moderately short growing season, and yields a versatile, high-quality flour that is widely used in baking.
  • Most bread is made with wheat flour, even many breads named for the other grains they contain, including most rye and oat breads.
  • Many other popular foods are made from wheat flour as well, resulting in a large demand for the grain even in economies with a significant food surplus.

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Indian Scenario

  • Government announces Minimum Support Prices (MSP), which is the minimum price at which procurement has to be carried.
  • The total procurement of wheat by Government agencies ranges from 8 to 20 million tons, accounting for only 15-20% of the total production.
  • The support price operation and the Public Distribution Systems (PDS) play a significant role in maintaining reasonable and stable food grain prices in the country for both the producers and consumers.
  • India consumes around 70-72 million tons of wheat a year. Most domestic wheat consumption is in the form of homemade chapatis or rotis using custom milled atta, although usage of branded packaged atta marketed by large companies, is increasing in cities.
  • There are around 200 large flourmills in India, with a milling capacity of around 15 million tons.
  • India exported around 5 million tons subsidized by Govt in 2003-04, as a result of surplus stock. Southeast Asia and Gulf countries are major importers of Indian wheat.
  • Markfed is one of the largest wheat exporters in the country. In 2003-04, it had exported 2.65 million tonnes of wheat.

    • Domestic Wheat Marketing:

  • The government mainly through the Food Corporation of India and other associated state agencies procures wheat for the Public Distribution System. Inter-state movement of wheat and wheat products is permissible throughout India.
  • Procurement prices (According to crop year) are announced by the government at the beginning of every wheat season. The central issue price for sale under the public distribution system is common to all the states.
  • In Punjab there is a well established market structure for wheat and normally the trade flows in the following market channel. Producer - Wholesaler - Retailer - Consumer
  • The Punjab Government has set up Punjab State Grain Procurement Corporation for the procurement of food grains, including wheat and paddy.
  • The new corporation will replace the Food and Civil Supplies Department in the procurement of two major crops of the state.
  • The state government has provided a corpus fund of Rs 1 crore to this corporation to facilitate the procurement operation.

    • Sale of wheat under OMSS(D)

  • The Open Market Sale Scheme (Domestic) for wheat was introduced in October, 1993. Various pricing parameters are considered while fixing prices such as like State-wise, Centre wise, Zone wise etc..
  • Prices of wheat under the OMSS(D) were determined and announced by the Central Government till October, 2000 when the High Level Committee(HLC) of the FCI was empowered to fix these prices.
  • The zone based pricing pattern adopted by the HLC has been switched over to State wise prices since February, 2002 and from February,2003 these State-wise prices are being fixed on the basis of age of the crop.
  • These month wise prices are now being fixed after taking into account the acquisition cost, the average freight to the State from the procuring region and open market prices.

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Punjab

Wheat

Wheat Management