Food crops except wheat trading below MSP, amid surplus harvests: RBI

The latest Reserve Bank of India (RBI) bulletin has revealed that average mandi (wholesale market) prices for most major food crops, except wheat, are currently trading below the government’s minimum support price (MSP).

This unusual trend is primarily due to bumper harvests of kharif and rabi crops, signalling abundant supply and a potential easing of food inflation across the country.

The minimum support price is a government-guaranteed price set for 23 crops to protect farmers from steep price falls and ensure they receive a minimum income for their produce. When market prices fall below MSP, the government steps in to procure crops at this floor price, safeguarding farmers from distress sales.

However, procurement is largely limited to staples like wheat and rice, with other crops often sold directly in mandis at market-driven prices.

The RBI bulletin points to a bumper harvest this year, resulting in an oversupply of most food grains and pulses. This surplus has pushed mandi prices below MSP levels for crops such as pulses, oilseeds and paddy.

For example, paddy sowing has exceeded normal acreage by over 7 per cent, and summer crop sowing is nearly complete, supported by favourable weather and an above-average monsoon forecast for 2025.

This oversupply, combined with government policy measures aimed at controlling inflation, has helped moderate prices in wholesale markets. As a result, consumers may benefit from stable or lower food prices in the coming months.

While lower prices can be good news for consumers, they pose challenges for farmers who depend on MSP as a safety net. Since government procurement focuses mainly on wheat and rice, farmers growing other crops may face reduced income if market prices remain below MSP for extended periods.

To partially offset this, some states like Rajasthan and Madhya Pradesh have announced bonuses over MSP for wheat, supporting farmers’ earnings. Nonetheless, the overall scenario calls for careful policy balancing to ensure farmers are not forced into distress sales while keeping food affordable.

The bulletin also notes rising prices for edible oils such as soyabean, sunflower and mustard oil, reflecting supply constraints or increased demand in these segments. Vegetable prices show a mixed picture: onion prices have declined further, while potato and tomato prices have inched up.

With the southwest monsoon forecasted to be 5 per cent above the long-term average and expected to arrive early, prospects for the upcoming kharif season are bright. Increased fertiliser demand further indicates farmers’ readiness to maintain or expand crop production.

This combination of favourable weather, strong sowing and policy support bodes well for food availability and price stability. However, managing the delicate balance between ensuring fair farmer incomes and protecting consumers from inflation will remain a key challenge.