Harish Damodaran

New Delhi, Sept 30 Last year, wheat was one of the best domestic ‘stocks’ to invest in. At the start of the harvesting season in early April, wheat dara was quoting in Delhi at Rs 750-760 per quintal and by end-September had touched Rs 1,000. Those who bought during the harvest period, thus, saw the value of their stock appreciate by a third in less than six months.

But this time, those who made huge wheat buys expecting a repeat of last year – and that includes large multinationals and corporates – are finding things not going quite their way.

Since April, wheat dara has gone up from Rs 950 to the current Rs 1,000-1,010 a quintal. In other words, a rise of just 50-60 paise a kg compared to the corresponding Rs 2.50 of last year.

The picture becomes grimmer if the cost of ‘carrying’ the grain is factored in. “Last year, you could borrow at 9-9.5 per cent, whereas this time it is 13-14 per cent.

If you add interest and storage charges of Rs 5-6, the carrying cost comes to Rs 17-20 per quintal per month. Anybody who bought wheat in April would have incurred around Rs 100 per quintal in carrying cost, which offsets even the limited price appreciation of Rs 50-60,” trade sources pointed out.

According to the Food Ministry, private companies – those who have bought more than 50,000 tonnes each and have filed returns under the Wheat (Stock Declaration by Companies or Firms or Individuals) Order, 2007 – have declared aggregate purchases of 19,79,222 tonnes during April to August.

“Most of them would have burnt their fingers. Everybody underestimated the size of the crop,” the sources noted.

The Centre has reckoned the current year’s wheat output at 74.89 million tonnes (mt), against the 69.35 mt of the preceding year.

“The final estimate could turn out even higher, considering that imports in 2006-07 (Government plus private) totalled 6.3 mt, while being only 1.3 mt this year. If despite lower imports, prices have ruled flat, it only indicates a much better crop than expected,” they added.

Ironically, the flat trend in domestic wheat prices comes in the midst of an unprecedented global bull run in the commodity.

Since April, wheat futures at the Chicago Board of Trade have more than doubled from $4.5 a bushel to $9.4 levels.

So, while hedge funds and institutional investors have made a killing in wheat internationally, those who bet on the commodity back home have not been that lucky.

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