The government’s recent decision to allow the export of 25 lakh tonnes (LT) of wheat, after a gap of nearly four years, along with an additional 5 LT of wheat products, is said to be a decisive and farmer-centric step to stabilise domestic markets and ensure remunerative returns to producers.
The government has further claimed that this calibrated decision has been taken after a comprehensive assessment of the current availability and price scenario. Some time ago, stock limits on processors, traders, retailers and value chain participants were lifted.
Good policy, questionable timing
In reality, allowing wheat export is a good policy with bad timing. Bad timing because weather risks are looming. Even as the upcoming wheat crop is in the process of maturing and gradually readying for harvest in the next few weeks, rising day temperatures (well above the crop-friendly 21–22 degrees Celsius) across many states in northern India may escalate risks to harvest size.
To make matters worse, the wheat-growing regions, especially in eastern (Uttar Pradesh, Bihar) and central parts of the country (Madhya Pradesh), are facing serious moisture deficit because of inadequate winter rains. So far, wheat bowls Punjab and Haryana have continued to enjoy benign weather.
The area under wheat cultivation stands at a record 334 lakh hectares, slightly more than 328 lakh hectares last year.
The government has set 1,190 LT as the wheat production target for 2025–26. The government’s production estimate for 2024–25 was 1,179 LT, although private estimates peg the actual production at 10 per cent lower. The big question is whether moisture stress and day temperature over the next several weeks would hurt the yields and the size of the upcoming harvest.
Heat stress and supply concerns
That Indian wheat is at the limit of heat tolerance is widely recognised. In three out of the last six years, wheat crops faced moisture stress and heat stress, resulting in lower production, a tighter supply situation and a price rise.
As of January 1, wheat stocks with the government procurement agency, Food Corporation of India (FCI), were 275 LT. After the release of wheat for various welfare programmes, the stock may decline to less than 200 LT by April 1.
If weather risks to the wheat crop were to materialise, it would not only hurt the yields and the total harvest size but could also potentially send open market prices northwards and frustrate the procurement efforts.
The procurement price for 2025–26 is set at Rs 2,585 a quintal (100 kilograms). Currently, market rates are hovering around that level. If the weather plays spoilsport, the rates will move higher.
Worse, Indian wheat is outpriced in the export market. Origins such as Argentina are selling at around $250–260 a tonne, whereas the price of Indian wheat would be close to $300 a tonne. Despite a weak rupee, there is no export parity. This late decision to allow export is not going to help growers.
Caution for policymakers
This is not to raise an alarm and not to assert that our wheat crop is sure to face heat stress damage, but to provide a notice of caution for the policymakers about the looming possibility. Monitoring temperature in key wheat-growing regions will provide early warning signals.
Looking further ahead, there are early indications of a developing El Nino in the second half of the year. We don’t know as yet if it would be mild or severe. El Nino is usually associated with dry conditions that can potentially affect the 2026–27 Kharif crops, including rice.
We cannot afford to have two back-to-back adverse weather events affecting our wheat and rice crops. Food inflation may go out of control. At the same time, weather risks cannot be wished away. India’s Meteorological Centre comes up with its southwest monsoon forecast sometime in April. New Delhi must prepare a contingency plan to mitigate the risk. Forewarned is forearmed.
G. Chandrashekhar is a commodity market specialist. Views are personal.
