India’s Wheat Sector Faces Multi-Layered Pressure Ahead of Procurement Season
28-Mar-2026 10:19 AM
India’s Wheat Sector Faces Multi-Layered Pressure Ahead of Procurement Season
★ India’s wheat industry is entering a critical phase, with a combination of supply-side strength and logistical as well as policy constraints creating a complex and potentially volatile situation for both farmers and policymakers.
★ The supply outlook remains overwhelmingly strong this season. Wheat stocks in the central pool stood at 236.22 lakh tonnes as of 1 March, significantly higher than the levels recorded in previous years—134.06 lakh tonnes (2025), 96.92 lakh tonnes (2024), and 116.70 lakh tonnes (2023). This marks the highest stock position in the last four years.
★ Adding to this, record crop production is expected, supported by favorable weather conditions. Unlike a typical year where around 10% of the crop faces weather-related damage, this season’s losses are estimated at only 5–8% on a pan-India basis. Cooler temperatures compared to last year are also likely to enhance yields further, reinforcing the surplus outlook.
★ Despite higher production expectations, procurement targets have not been proportionately increased, raising concerns about the government’s ability to absorb the surplus.
★ Although procurement is scheduled to begin from 1 April across major states, including Punjab and Haryana, preparedness appears inadequate. The most pressing challenge is the shortage of gunny bags, which are essential for procurement operations.
Several states have floated tenders for both new and used gunny bags, but high costs have led to delays, cancellations, or re-tendering. Attempts to shift to plastic bags have also faced hurdles due to elevated prices of plastic granules, driven by higher crude oil costs and limited availability.
★ With tenders still under process, the timeline for awarding contracts and ensuring physical delivery of packaging materials may not align with peak arrivals expected from late April to end-May, potentially creating a logistical bottleneck.
★ If procurement infrastructure fails to match the pace of arrivals, farmers may be forced to sell wheat below MSP levels. This could lead to heightened farmer dissatisfaction, particularly in key producing states like Punjab and Haryana, where government procurement plays a dominant role.
★ While upcoming elections are scheduled in non-wheat-producing states such as Assam, West Bengal, Tamil Nadu, Kerala, and Puducherry, any distress among farmers in major producing regions could still impact the broader political narrative and government perception.
★ The financial position of the Food Corporation of India (FCI) seems to be under strain.
Wheat sales under the OMSS (Open Market Sale Scheme) have remained subdued. Rice offtake has also been weak, despite being procured at around ₹30/kg and sold at approximately ₹22.5/kg. This mismatch indicates limited market absorption and potential financial pressure on government agencies.
★ International wheat prices remain below Indian FOB levels, making exports uncompetitive. Although geopolitical tensions have recently narrowed the price gap, any normalization could widen it again.
★ The government has permitted the export of 25 lakh tonnes, which is relatively modest compared to India’s production scale (25 lakh tons out of 1180 lakh tons production equivalent to only 2%) and is unlikely to significantly ease domestic oversupply.
★ Recent policy measures, including the reduction in excise duty on petrol and diesel amid global uncertainties, may further strain government revenues, limiting its flexibility to support the wheat sector through additional incentives or interventions.
★ India’s wheat sector is currently caught in a paradox of abundance and constraint—ample supply on one hand, and logistical, financial, and policy limitations on the other. The coming weeks, particularly the peak arrival period, will be crucial in determining whether the system can manage this surplus efficiently or if market disruptions and farmer distress emerge as key challenges.
Important Disclaimer:
This report is for informational purposes only I-Grain India does not take any responsibility for profits or losses and does not promote any specific market movement (bullish or bearish). *Please make decisions based on your own judgment and understanding.