Heat wave scorches wheat crop

by Janaki Samant

India’s hopes of yet another record-high wheat output during 2021-22 rabi season have been dashed. The country is apparently experiencing the devastating impact of climate-change and global warming. March 2022 was the hottest March in 122 years of recorded history. The average day temperature during the month was 33.1 degrees Celsius, according to India Meteorological Department (IMD). March 2022 was also one of the warmest March for the northwestern region of India and also for central India. These regions include the main wheat producing states of the country.

Wheat crop is sensitive to heat. During the 2021-22 rabi season, delayed sowing combined with very early onset of summer with high temperatures and heat waves resulted in shrivelling of the wheat crop in the northern belt, particularly in Punjab and Haryana. As a result, yield is estimated to have declined sharply. Unofficial estimates regarding the fall in wheat production vary from 10 to 20 per cent. The second advance estimate of foodgrain production released by the Ministry of Agriculture on 16 February 2022, had placed wheat output at a record high of 111.3 million tonnes. A 10 per cent loss translates into wheat production falling to 100 million tonnes. As reported by The Economic Times, the food secretary has said that the Ministry of Agriculture has revised wheat production estimate downward to 105 million tonnes during 2021-22. The third advance estimate for foodgrain production will be released in the third week of May.

Led by consistent expansion in area in the last two years and rising yield in the preceding four years, total wheat production increased from 92.3 million tonnes during 2015-16 to 109 million tonnes during 2020-21.

Wheat production accounts for more than 30 per cent of the total foodgrain production in the country. A fall in wheat output will have repercussions on exports, procurement, stocks and allocation under public distribution system (PDS) and domestic prices of wheat and wheat products.

India is estimated to have exported around seven million tonnes of wheat during 2021-22. The Russian invasion of Ukraine had led to a huge shortfall in wheat exports. These two countries together account for more than 25 per cent of global production and 30 per cent of wheat exports. Following the destruction in Ukraine and sanctions on Russia, global wheat prices surged by 24.5 per cent in March 2022 over the preceding month. As India’s wheat crop is harvested from mid-March, this was a golden opportunity to fill up the global demand-supply gap, that too at higher price. Wheat exports were reportedly expected to increase to 12 million tonnes during 2022-23. However, the severe damage to crops on account of excess heat is likely to put a dampener on India’s wheat export prospects.

The central government procures foodgrains, mainly rice and wheat, at minimum support price (MSP) from farmers and sells it at subsidised rates through the public distribution system (PDS). The government’s wheat procurement had been rising. It reached an all-time high of 43.4 million tonnes during the 2021-22 rabi marketing season (RMS). This was almost 40 per cent of the wheat production. As a result, wheat stocks had peaked to an all-time high of 60.4 million tonnes by end-June 2021.

This year, following expectations of yet another bumper harvest, the government had set a higher target of procuring 44 million tonnes. However, driven by a combination of high market prices, good export prospects and damage to crop leading to lower production, farmers have refrained from selling at government procurement centres. They preferred selling to private traders at higher prices. Some farmers are holding back their harvest in anticipation of prices rising further.

Weekly wheat prices have been rising consistently. Average price peaked to an all-time high at Rs.2,132.4 per quintal during the week ended 30 April 2022. This is higher than the MSP of Rs.2,015 per quintal at which the government was procuring wheat.

By 1 May 2022, wheat procurement was at 16.2 million tonnes compared to the procurement of 27 million tonnes during the corresponding period of last year. Wheat procurement is barely expected to reach 20 million tonnes during 2022-23 RMS. This would be 55 per cent lower than the procurement last year. Procurement would hit a 15-year low.

Procurement in Haryana was down 53 per cent and that in Punjab was lower by 15 per cent. These two states have sought relaxation in procurement norms. They have sought to raise the share of shrivelled grain under the fair and average quality (FAQ) norms from the present six per cent to 20 per cent. Madhya Pradesh and Uttar Pradesh have also recorded a steep fall in wheat procurement.

Lower procurement is likely to create a shortfall for the PDS. Besides the distribution under the National Food Security Act (NFSA) for various welfare schemes, the government also distributes free foodgrain under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). The food security welfare scheme was introduced on 26 March 2020 at the beginning of the pandemic to provide free food to the poor. The scheme will continue till September 2022. Total offtake of wheat for all welfare schemes was 48.2 million tonnes during 2021-22.

By end-March 2022, wheat stocks had dropped to a 3-year low of 19 million tonnes. Another 20 million tonnes will get added by end-June 2022 after the ongoing procurement is completed.

The impact of low procurement is already evident. The central government revised the allocation of rice and wheat for 12 States under PMGKAY. It directed Uttar Pradesh, Bihar, Tamil Nadu and Kerala to shift to rice for their entire grain requirement. For others, the reduction in the quantity of wheat would be compensated with the same amount of rice so that there is no shortage in overall grains allocation.

Export restrictions are also reportedly on cards, though the food secretary has denied any such plans. We expect wheat prices to remain elevated.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.3 -1.9
Consumer Sentiments Index
Base September-December 2015
69.5 +0.5
Consumer Expectations Index
Base September-December 2015
69.4 +0.4
Current Economic Conditions Index
Base September-December 2015
69.7 +0.7
Quarterly CapEx Aggregates
(Rs.trillion) Jun 21 Sep 21 Dec 21 Mar 22
New projects 2.89 3.14 3.46 4.89
Completed projects 0.73 1.28 2.76 1.05
Stalled projects 0.33 0.28 0.06 0.29
Revived projects 0.14 0.39 2.06 0.28
Implementation stalled projects 0.64 0.25 0.65 0.07
Updated on: 16 May 2022 3:28PM
Quarterly Financials of Listed Companies
(% change) Jun 21 Sep 21 Dec 21 Mar 22
All listed Companies
 Income 42.3 27.5 23.5 19.8
 Expenses 41.9 26.7 21.7 17.4
 Net profit 139.8 55.1 31.9 45.7
 PAT margin (%) 9.0 9.6 9.0 11.4
 Count of Cos. 4,556 4,677 4,690 905
Non-financial Companies
 Income 61.0 35.7 29.3 27.6
 Expenses 62.6 36.0 29.0 27.9
 Net profit 192.7 59.7 18.3 25.7
 PAT margin (%) 8.4 8.8 7.5 10.3
 Net fixed assets 4.9 -2.1
 Current assets 10.8 19.0
 Current liabilities 0.8 12.5
 Borrowings 12.1 7.1
 Reserves & surplus 12.4 9.5
 Count of Cos. 3,330 3,382 3,402 637
Numbers are net of P&E
Updated on: 16 May 2022 3:28PM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.5 -0.9 16.1
 Expenses 0.3 -3.3 16.7
 Net profit -4.9 72.5 24.3
 PAT margin (%) 2.0 4.5 12.3
 Assets 8.9 9.6 3.3
 Net worth 4.6 11.5 5.2
 RONW (%) 3.4 7.0 12.4
 Count of Cos. 32,202 29,546 46
Non-financial Companies
 Income -1.3 -2.0 16.2
 Expenses -1.0 -4.1 17.4
 Net profit -20.8 63.1 20.8
 PAT margin (%) 2.2 4.2 11.1
 Net fixed assets 11.2 1.3 8.5
 Net worth 2.2 10.4 8.3
 RONW (%) 4.7 8.0 15.8
 Debt / Equity (times) 1.2 1.0 0.1
 Interest cover (times) 1.9 2.5 26.6
 Net working capital cycle (days) 81 84 38
 Count of Cos. 25,551 23,301 36
Numbers are net of P&E
Updated on: 12 May 2022 7:22AM