Indian domestic wheat prices have been edging up since May 2023, reaching $304.16/mt on 2nd August 2023, up 9.16% month-on-month (m-o-m) and 7.95% year-on-year (y-o-y). The high domestic wheat prices are attributable to declining wheat output in India as a result of poor weather conditions during the wheat harvesting period (February-May) and rising demand. According to Indian government sources, wheat production in India was projected at a record of 112 million mt for the 2023/24 season. However, according to market players, the estimations are currently around 101-103 million mt, which is the lowest since the 2019/2020 season. The Indian government is considering taking precautions that would help to stabilise domestic wheat prices. One of the options is to lower the import duty on wheat, which is currently set at 40%, or to abolish the import duty completely. This would help to import more wheat, thus leading to adequate supply levels, lower wheat prices and stable food inflation in India. Another option could be lowering stock holding limits, which were set in June. According to Mintec sources, there are rumours that India is willing to import 9 million mt of wheat from Russia, although no confirmation has been received. A trader told Mintec, “there is a lack of clarity, and I doubt that a government-to-government deal could happen with these big volumes unless the deal is done in a tender; that’s a different conversation. Yet imports are necessary to stabilise prices and food inflation.” In the case of India increasing wheat imports, this could further put pressure on the global wheat supply chain and potentially lead to higher wheat prices.
With these uncertainties, geopolitical factors such as the Russia-Ukraine war and adverse weather conditions throughout the northern hemisphere's growing season will likely continue contributing to wheat price volatility.
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