Whalesbook
Market Pressure Intensifies
The Indian government's decision to re-launch e-auctions for wheat under the Open Market Sale Scheme (OMSS) has sent market prices tumbling. This move has created significant financial pressure for flour millers and stockists across the country. Prices have dropped by approximately ₹100 per quintal, settling in the range of ₹2,750 to ₹2,800.
Bulk buyers, including millers, are being offered wheat at a fixed price of ₹2,550 per quintal under the OMSS for the 2025-26 period, excluding freight charges from Punjab. This intervention aims to manage prices but has introduced volatility.
Record Output Meets Intervention
This price dip occurs against a backdrop of record wheat production, exceeding 117 million tonnes against an estimated demand of 108 million tonnes. Ample availability in the open market has kept prices sluggish. Trade sources indicate that the surplus wheat being sold by the Food Corporation of India (FCI) could further depress prices, potentially discouraging private purchases of grain from the new marketing season beginning April 1.
Sources noted that only 0.15 million tonnes of wheat were offloaded by FCI in November and early December, falling short of the 3 million tonne target for FY26. The OMSS sales had previously been discontinued due to a lukewarm response from millers.
Inflationary Impact Muted
Despite the downward price pressure, wheat inflation in November eased to a mere 0.33%, a significant drop from 2.04% in October. While the OMSS objective is to curb inflation by providing food grains at reduced prices, the current market dynamics and policy uncertainty surrounding government stock disposal are creating an unstable environment.