Date:28/03/2007 URL: http://www.thehindubusinessline.com/2007/03/28/stories/2007032801291100.htm

Back Sharp fall in wheat prices unlikely despite better crop

M.R. Subramani

Prospects for import unviable `for now'; mills see no availability problem

Market trend
Prices may rule at around Rs 1,000 a quintal, since FCI's procurement would be at not less Rs 850 a quintal
While flour mills in North India will have to foot at least Rs 1,025-1,050 a quintal at the gates, their counterparts in the South will have to pay Rs 1,100-1,150 based on quality

Chennai March 27 Wheat prices are unlikely to decline despite hopes of better crop, while prospects for the grain's import are seen unviable at prevailing prices in the global market.

Wheat (dara) prices are currently ruling at Rs 1,037-1,040 a quintal in Delhi market.

"Wheat prices are likely to witness a decline next week but they may, at the most, come down by Rs 30 only,'' said Mr Vinod Kapoor, President of Wheat Products Promotion Society.

"Maybe in Delhi market, the prices could decline by Rs 50 as wheat is transported in the farmer's name.''

The prices are expected to rule at around Rs 1,000 a quintal since the Food Corporation of India would be procuring wheat for buffer stocks at not less than Rs 850 a quintal and also because of other costs.

"If FCI has to foot so much, we will have to pay even higher,'' said a South India-based private flour miller.

This would mean that while flour mills in North India will have to foot at least Rs 1,025-1,050 a quintal of wheat at the gates, their counterparts in the South will have to pay Rs 1,100-1,150 based on quality of the wheat purchased. The mills, however, do not see problems of availability this year since the crop is said to be good.

Good crop

"The crop is extremely good and it will hit the market in the next week or so,'' said Mr Pramod Kumar of the Bangalore-based Sunil Agro Foods.

"The crop could be above the 72.5 million tonnes-mark as anticipated by the Centre. But we will have to see if there will be anymore rains,'' said Mr Kapoor.

Higher output

This year's wheat production is estimated to be higher than last year's 69.48 million tonnes. Last year, the crop was affected by adverse weather.

Coupled with low buffer stocks, it created problems for the Centre, which had to import to meet the needs for supply through ration shops and also allow private trade to bring in from sources abroad to meet the rising demand.

The Centre imported 55 lakh tonnes through the State Trading Corporation, while private trade is reported to have brought in at least 20 lakh tonnes. This year also, the Centre has kept the import option open by extending duty-free shipments into the country till December 31. The US Department of Agriculture has projected that imports could total 30 lakh tonnes.

"At current global rates, imports are not feasible,'' said Mr Kumar.

Prices for wheat of Black Sea origin are ruling at $235 a tonne and overall, landed costs could well be above domestic prices, traders say.

"Currently, Australia has run out of stocks as their crop last year was hit by drought. Black sea origin wheat will be available only during June-July, while Australian wheat from the new crop will be available only in November,'' said the South-based miller.

"While we have quarantine problems with US wheat, Canadian wheat should also be available early in the second half. But freight charges could determine the costs,'' he said.

"Import is an option that can be considered only in the second half depending on the prices then,'' the miller added.

On LIFFE, milling wheat for May delivery is currently quoting at $204.30 a tonne.