Commodity Online
MUMBAI: FMCG companies are faced with high cost wheat procurement as the crop prices have started surging due to scanty rains in the wheat growing areas of the country, hitting the bottom line of the companies.

Food processing companies have to pay more for the select wheat variety as the crop in the wheat growing area has fallen due to poor rains in the crop area. Prices of Sharbati were found to be hovering at around Rs.2500 – Rs.3000 per quintal and it is likely to touch Rs.4000 per quintal as the days pass by. The demand for Sharbati wheat is high among the pasta and biscuit makers. Some of the atta makers too heavily depend on the high protein variety of grain.



However, the FMCG companies traded firm on the bourses with most of the stocks rising over past one month. Britannia Industries Ltd was up from its monthly lows in March at Rs.1230 to Rs.1510 recently. Similarly, Nestle India Ltd was up at Rs.1610 from its monthly lows of Rs.1417 a month back.

FMCG majors, ITC Ltd and Godrej Consumer products Ltd recorded healthy gains by surging over 15% during one month. ITC was trading at Rs. 158.20 during mid March, which surged to Rs. 188 today. Similarly, GCPL was trading at Rs.112 during a month back but rose to Rs.132 recently.

Hindustan Unilever Ltd recorded a rather moderate gain with 6% rise over past one month. The stocks have been positive on the Bombay Stock Exchange over past one month. Today, the sectoral index, BSE FMCG index was up by close to 1% at 2064.51 points, while Sensex was trading at 10,991 levels up marginally by 0.2% from its Monday’s close.

The disturbance was witnessed in the crop production, when the water table started depleting rapidly with uneven rain fall. In Punjab, the state agriculture department has given a downward revision for the wheat production in state as there was heavy damage following rains and hailstorms.

The state had earlier estimated wheat production at 155 lakh MT for the current rabi season against last year’s output of 157.20 lakh MT. But considering the recent damage to the crop, the authority has revised the output estimates to below 150 lakh MT.

According to farmers the productivity too has fallen to as low as 5 quintals per hectare. Several multinational companies engaged in food processing industry have felt the heat of the rising wheat prices. Companies like ITC, Cargill and Hindustan Unilever have not started procuring wheat yet. But they are expected to start procuring from the next week or fortnight.

But with increased input costs, Companies involved in the food processing businesses and FMCG segments might see their bottom line shrinking. Experts suggested that the impact of increased input cost would reflect in the third quarter of the current fiscal.

The Ministry of agriculture had estimated the wheat output to be a record one at 78.5 million tonne with increased sowing area from 27.4 million hectares last year to 27.6 million hectares this year. However, the wheat output may reduce by almost 10-20% following the uneven whether scenario.

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