India is the second largest producer of wheat in the world after China, contributing to about 13.02 per cent of the world’s production. According to the 4th advance estimates, wheat production for 2012-13 is estimated at a record 92.46 million tonnes. Since the last three years, production has increased owing to good yields across production tracks, supported by good monsoon rains and increase in the Minimum Support Price. Over 94.54 per cent of the total production for the country was contributed by 6 states. The top wheat producing states of the country are Uttar Pradesh (31.93 per cent), Punjab (18.21 per cent), Haryana (13.37 per cent), Madhya Pradesh (12.16 per cent), Rajasthan (9.82 per cent) and Bihar (4.98 per cent). The domestic consumption is estimated at 85 to 90 million MT. India holds the third position in the major wheat consumer’s list after China and European Union.
World wheat production is projected at a record 708.9 million MT, up 3.5 million MT. Higher production in Canada, the European Union (EU), and the FSU-12 more than offsets reductions in Iran and Paraguay. Black Sea production is expected to rebound to 108 million MT due to more favorable weather conditions, compared to 77.2 million MT in 2012-13. Consumption is expected to reach new record at 707 million MT, up 4 per cent from 2012-13 and World feed use is expected to rise 3 percent to 141 million MT.
Price Trend Analysis
The wheat Spot market price variation study indicates that the prices volatility remains steady for most of the year and a spurt is witnessed in the period between June and August. Reports of Black Sea exporters re-entering the export market at competitive prices is likely to keep the global price volatility under check. There are reports that Black Sea production is likely to rebound by 40 per cent to 108 million MT due to improved weather and higher yields, Russian production is expected to increase by 16.3 million MT from 2012-13 to 54.0 million MT and Black Sea exports are expected to reach 37.1 million MT and represent 24 per cent of world market, compared to 19 per cent in 2012-13. In the domestic market, as per the trend, the spurt in the volatility was noticed in the July – August 2013 period (from an average of around 20 per cent to over 40 per cent) and since then the prices have been consolidating in a tight range.
The major development in the global market which has supported the global market is the demand from China which is expected to import 9.5 million MT, compared to the 5-year average of 1.74 million MT with its production remaining unchanged at 121 million MT. The spot prices at Delhi sharply declined from March onwards due to record wheat production estimation of 92.46 million MT. The Indian market is marginally stable on the higher level amidst expectation of export of 5.5 million MT of wheat in the current marketing year.
Production Trends & Price Forecast
Wheat being a Rabi crop, sown during October to December, is highly dependent on good monsoon. This year, good rainfall received during the current monsoon season in major producing regions will certainly provide the required soil moisture during the sowing period. The upcoming season is likely to see production of around 90 to 95 million MT. the Indian market is currently pegged around Rs. 1650 a quintal, which is likely to hold on for the coming season without much fluctuation. I expect the 2014 prices to be range bound with the upper cap of Rs. 1780 a quintal & lower firm support at Rs. 1420 a quintal.