Possibility of El Nino till May raises concerns about warmer winter, impact on wheat crop

Vibha Sharma

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Chandigarh, October 19

Ahead of Assembly elections in five states, which include key wheat-growing regions, Prime Minister Narendra Modi-led Centre on Wednesday hiked the minimum support price (MSP) of various rabi crops, giving the key foodgrain of the season a raise of Rs 150.

For the 2023-24 marketing season (April-March), the MSP on wheat was Rs 2,125 per quintal. With the Rs 150 hike (which has taken the MSP up to Rs 2,275 per quintal for the 2024-25 marketing season), the government hopes to enthuse farmers who form a key vote base and also boost production of the grain.

While higher MSP may also impact the already-increasing prices of the grain, it is a chance the government appears ready to take in mind the high stakes involved.

Amid apprehensions of warmer-than-normal winter and tight supply, experts say the government needs to take active steps, including allowing duty-free imports. However, so far, there appear to be no immediate plans to slash or abolish the 40% import tax on wheat.

El Nino, Indian winter and rabi season

El Nino (the warm phase of the El Nino–Southern Oscillation associated with higher SSTs in central and east-central equatorial Pacific) that leads to prolonged dry phases and droughts in the region, is expected to continue at least until May 2024, according to the US weather agency Climate Prediction Centre.

This cannot be good news for either wheat farmers or the planners of the country.

Meteorologists say temperatures in the winter of 2023 may be influenced by El Nino “majorly” in many parts of the world. Some reports quoted the CPC as saying that there is about a 95% chance that 2023 will be the warmest or the second-warmest year on record and the trend may continue into 2024 if El Nino continues to remain strong.

Typically, a strong El Nino is associated with warmer-than-average weather conditions and lesser rains in plains and snow in hills. The possibility of warmer-than-average winter can also be a cause of concern for wheat farmers as grain required consistent cold temperatures (around 15/16 degrees C) in initial stages.

In fact, experts claim that one of the reasons for higher prices of wheat and its by-products like atta is that the market is factoring in El Nino concerns—warmer-than average temperatures during the coming winter/rabi season.

Centre taking no chances

Despite appeals by the industry/trade for opening/easing import option, the government seems wary keeping in mind the perceptions involved.  “The aim is to incentivise our own farmers and boost production,” say officials.

The rise in prices and fears of hoarding ahead of the festive season saw the Centre last month reduce the stock limits of wheat for traders, wholesalers, retailers, big chain retailers and processors in all states and UTs.

The wheat stock limit was reduced from 3,000 tonnes to 2,000 tonnes to curb rising retail and wholesale prices of wheat and wheat flour. However, some trade analysts claim that the supply and demand mismatch may lead to a further increase.

Around May, the Food Corporation of India also decided to offload extra wheat through the Open Market Sale Scheme (OMSS) on a quarterly basis from July.

For the Centre, OMMS option is always available for the stabilisation of wheat prices, explain officials.

Under the policy, the excess stock is sold in open market through e-auction to ensure the stocks do not go to waste and to reduce the carrying costs of the grain.

“The primary objective of the OMSS is to maintain price stability in the market by providing an adequate supply of food grain at reasonable prices to bulk consumers. The government had in January announced plans to sell wheat in the open market from its buffer stock under the OMSS in order to check rising wheat and wheat flour prices,” they add.

Wheat/atta prices continue to rule high   

According to some reports, the prices are up by nearly 20% in the past six months.

“Due to strong demand for festive season and an import duty that makes overseas purchases an unviable option for domestic flour mills, wheat prices surged to an eight-month high this week,” trade analysts say.

The government should release more stocks and reduce import duty to maintain the supply-demand balance and control prices, they add.

As of October 1, wheat in government stocks stands at 239.95 lakh tonnes (around 24 MT) as per FCI figures.