The Hindu Business Line : Bunching of imports driving up wheat prices

This is a question that many in the trade are asking and not without reason. Within the last one month, the State Trading Corporation of India (STC), MMTC Ltd and PEC have floated tenders for import of around 6.5 lakh tonnes (lt) of wheat.

This comes well after STC had contracted 35 lt for the public distribution system (PDS), the last tender for which was floated on June 8 and finalised on June 26.

At that stage, the Union Agriculture Minister, Mr Sharad Pawar, had even declared that the Union Government's import programme was complete.

More tenders

But since then, there have been four new tenders, of which two are by MMTC (including the latest one on Tuesday for up to 1.55 lt), one by PEC (a limited tender for 50,000 tonnes) and one by STC. Out of these four, it is STC's July 27 tender for four lt that has taken the market by surprise, given that the entire quantity is meant for the PDS. The other three have been floated on behalf of private roller mills, biscuit makers and other user industries, though the logic for all the three parastatals entering the market almost simultaneously is not fully clear.

Impact on prices

The effect on prices from such bunching of tenders - in terms of conveying signals to the world market - is apparent from the rates at which the imports have been contracted. In its first tender of February 8, STC got five lt of Australian wheat at $178.75 a tonne, cost & freight (c&f).

In the latest July 27 tender, it has received eight bids quoting between $210 and $245 a tonne and reportedly finalised purchase of 3.3 lt tonnes (out of the tendered four lt) from the Geneva-based Agrico Trade & Finance SA at $210-212 a tonne. And what is being offered is wheat of Russian origin that sells at a discount to better-quality Australian, US or Canada wheat. This same wheat (Russian/Ukraine origin) was contracted by MMTC in its 50,000 tonne July 5 tender at $179 per tonne.

Plainly put, STC's cost of imported wheat between the first and last tender has risen by over $30 a tonne. If adjusted for quality, the hike would be more than $40 a tonne, given that southern millers have been offered Australian wheat at $220 per tonne. This has also had an impact on domestic wheat prices, which have shot up by nearly Rs 37 per quintal (September futures) since July 28.

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