The Hindu Business Line : Wheat prices gain despite 30 lakh t import tender

Wheat prices have tended to seek higher levels despite the State Trading Corporation (STC) coming out with a tender to import 30 lakh tonnes late on Monday.

"The floating of the tender has only psyched growers to hold back their stocks and as a result, prices have gained since Tuesday," a miller from Uttar Pradesh said.

"Prices have increased at least by Rs 20 a quintal since the STC tender was floated. There is shortage of supplies in the market," said Mr Vinod Kapoor, President, Wheat Products Promotion Society.

Futures gain

"Futures prices too have gained after the tender. Prices on NCDEX for December contracts have gained," said Mr Pramod Kumar, Executive Director, Belgaum Roller Flour Mills.

On Thursday, wheat (dara) was quoted at Rs 837.50 a quintal at Hapur against Rs 822.50 on May 8 when the tender was floated. In New Delhi, wheat (dara) was quoted at Rs 840-42 against Rs 825-30. It was closed on Thursday.

On NCDEX, December wheat contracts have increased to Rs 1,040 from Rs 1,028, while June contracts are up at Rs 933.80 from Rs 923. On MCX, June contracts have increased to Rs 948.90 from Rs 928.

Short supplies

Mr Kapoor said rising prices and short supplies were causing problems for the user industries and end product pricing has become a big issue.

"Prices are rising and auctions prices are around Rs 750 a quintal to start with. Arrivals of wheat this year are at least 17 lakh tonnes (lt) lower than last year," he said.

While trade sources say growers could be holding stocks, Mr Kapoor said the fact that the crop could be lower could not be counted out. "We think even 70 million tonnes (mt) production is an optimistic outlook," he said.

The Centre has revised the wheat production estimated to around 72 mt this week from its second estimate of 73.06 mt and its initial estimate of 75.5 mt. Last year, the production was put at 72 mt, but the Centre has now pruned it to 68 mt.

Drop in production

"The flour mills are in a real bad shape. One, they are not able to get supplies and two, they are unable to quote flour prices to buyers," Mr Kumar said.

Mr Kapoor said there could be at least 5 per cent drop in production compared with last year.

On May 8, the STC floated a tender to import 30 lt in parcels of 30,000-50,000 tonnes over a four-month period starting June. The tender ends on May 16 and winners of the bid have also to pay a guarantee of $3 million. The tender has received flak from almost all quarters.

"The move to import 30 lt at one go is an unwise move. This has resulted in prices rising in the global market. Also, no single supplier can offer the entire 30 lt. The Centre should have gone in for monthly imports," Mr Kumar said.

On the other hand, some of the big players such as Cargill, Reliance, ITC, AWB LTd, Adani and Britannia have bought nearly 15 lt, according to traders. Most of these purchases were made as the arrivals began at prices below Rs 700 a quintal, but higher than the minimum support price of Rs 650. The Centre, subsequently, has announced a bonus of Rs 50 a quintal to encourage farmers to sell their produce to the Food Corporation of India for buffer stocks but it has only helped prices rise.

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