Why the two main issues with food inflation at the moment are wheat and sugar?

The winter-spring crop, particularly wheat, is still in the field at this time, thus it is impossible to predict with certainty what yields will be gathered.

But wheat is not the only crop facing production problems. The issue with sugar is equally, if not more, serious. The output projections and stock situations for these two commodities seem to be the most unclear at the moment, which also has an impact on food inflation.

Wheat: Inventory control

The good news for wheat is that supplies are being opened before the fresh crop is bought on April 1.

The stockpiles in government godowns were the lowest for this date since 2008, at 75.02 lakh tonnes (lt) on April 1st, slightly over the required minimum buffer of 74.6 lt.

One of the primary reasons the equities fell to a 16-year low was the 2024 Lok Sabha elections. In 2023–2024 (April–March), the Food Corporation of India sold a record 100.88 lt of wheat on the open market. The Bharat Atta plan, which offered 6.73 liters of wheat flour at a discounted retail price of Rs 27.5/kg, was responsible for a large portion of those sales, which began in November 2023, just before the elections.

The wholesale price of wheat in Delhi has increased from Rs 2,400 to Rs 2,450 per quintal to between Rs 2,950 and Rs 3,000. The Modi administration has not made an effort to cut prices through stock drawdowns and excessive open market sales like it did last year. Instead, it has imposed inventory restrictions, which limit traders to no more than 250 tonnes and merchants to 4 tonnes per location.
When there are more stocks than there were the year before, the government is a little more relaxed and is under less pressure to make purchases.

When the fresh crop arrives, which is in early April in Rajasthan, the third week of March to the first week of April in MP, and the second to third week of March in Maharashtra and Gujarat, prices may start to decline. The level of output will determine how much they will simplify the government's task.

Central India is seeing a bumper crop, according to ground sources. The last time this happened, grain yields decreased because winter arrived later than expected, which affected the crop's vegetative development and tillering, and because January was cloudy and lacked sunshine, which hindered pollination and seed setting.

This period, there haven't been any significant temperature variations or haze or fog. Rajbir Yadav, chief scientist at the Indian institute of Agricultural Research in New Delhi.

The question mark is mostly over yields in north and northwest India, where the crop is in the grain-filling stage. For every additional day during this period, an additional 40 to 50 kg of wheat per acre is typically produced. As long as the maximum temperature remains below 35 degrees and there are no sudden spikes, the kernels will continue to collect starch and other nutrients.

Right now, the temperatures are well within range. If they continue far into April and yields in north and northwest India are as strong as they were last year (as they are for central India this time), the wheat inflation issues will be overcome. Grain will always be available in government mandis and warehouses.

According to the Indian Sugar & Bio-Energy Manufacturers Association, the sweetener's gross production for the 2024–2025 season (October–September) is expected to be 333 litres. After deducting 40 litres of sugar that were diverted to produce ethanol for blending with gasoline, the net output decreased to 293 litres from 319 litres in 2023–2024.

But as the crushing season has progressed, the estimates have been gradually lowered. Net production as of February 28 was only 220 lt, as opposed to 255 lt for the same period in 2023–2024. Furthermore, compared to 72 mills the year before, 186 of the 533 mills had ceased crushing because of a cane scarcity.

According to the most recent industry estimates, net sugar production is 265 liters, however some even predict 255 liters. A net production of 265 lt would leave 49.23 lt available on September 30 after 79.23 lt of opening inventories, 285 lt of domestic consumption, and 10 lt of exports (which the government approved on January 20).

If production drops to 255 lt, the closing stocks will be lower. They would last fewer than 1.7 months of residential use at less than 40 liters. That isn't an issue in and of itself. However, because Diwali and Dussehra happen in October and mills don't start crushing until November, there may be a mismatch between supply and demand, which might drive up prices.