In such an event, futures trading can actually add to the feeling of scarcity, says Ramesh Chand. Liquidity is high in the futures market, which attracts a new class of investors who have not much acquaintance with the fundamentals, feels Agriwatch. Excess focus on short supply only pushed prices to more unrealistic levels in pulses, which translated into higher retail prices.
A similar situation may be developing in wheat. The latest production estimate of 73 million tonnes is high but not enough because carryover stocks are at an all-time low. Coupled with low procurement, this can lead to a supply crunch of 4-5 million tonnes for the PDS. In recent years, farmers have also been reluctant to sell to government agencies because of better prices offered by private sector buyers. The government has already imported 0.5 million tonnes from Australia and overall wheat imports may touch 3.5 million tonnes this year to meet the seasonal shortfall, agriculture minister Sharad Pawar says. Even private-sector millers and wheat product- makers may be allowed to import underOGL at reduced import duty, he adds. With the monsoon forecast to be "normal" (or 93 per cent of the long-period average) this year too, the coming year might see the government firefighting on all fronts to control inflation.
