The Hindu Business Line : Wheat prices seen ruling firm above Rs 1,000/qtl

Wheat woes
Southern millers complain of shortage of stocks
`Govt measures have not yielded any results'
Grain in correction mode in global markets

Chennai , Sept 12

Though wheat prices fell on Tuesday by Rs 20 a quintal on fall in global prices, the rates are likely to rule firm at over Rs 1,000 until the year-end.

On Monday, wheat (dara) hit a record Rs 1,020-1,025 but fell to Rs 1,005-1,007 on Tuesday, since prices in the global market, especially on Chicago Board of Trade, declined on Monday tracking the broad fall witnessed in commodities.

The current prices translate to Rs 1,180 a quintal f.o.r Coimbatore/Bangalore for mills in the South.

"In Uttar Pradesh, the prices are at least Rs 10 higher. Flour mills are getting wheat only if they offer prices higher than what is prevailing in the market," said a miller from North India.

"If the prices are quoted Rs 5-10 lower in the market, traders are not willing to sell. You can get supplies if you are ready to pay a higher price."

But millers in the South are complaining that there is a genuine shortage of stocks. "Not much wheat is available. We think the crop is less that projected by the Centre," said Mr S. Pramod Kumar, Executive Director of Sunil Agro Foods.

The Agriculture Ministry had initially projected a wheat crop of 75.5 million tonnes (mt), and this was subsequently cut to 73.06 mt and then to 69.48 mt.

With the crop in 2005 also estimated lower at 68.5 mt, the view that enough stocks may not be available is gaining ground.

The Centre, in view of the lower crop, had first allowed the State Trading Corporation (STC) to import wheat at zero Customs duty to beef up buffer stocks.

Last week, it permitted the private trade to import the foodgrain at zero duty till December 31 to meet the demand for user industries such as bread and biscuit makers.

"Though the Centre cut the duty on wheat to zero, whatever benefit we could have derived has been offset by rise in global prices," said Mr R.K. Mohan, President of the Tamil Nadu Roller Flour Mills Association.

"The problem for us is that we are not able to get supplies even from the international market. AWB sold us 47,500 tonnes two weeks back; after that we have not got any offer. Also, firms such as AWB are now fully engaged in fulfilling their contracts with STC."

STC has contracted to buy a total of 55 lakh tonnes from buyers abroad and some of the consignments have begun arriving.

AWB, Glencore, Agricore, Toepfer and Concordia are some the firms that have won orders from STC to supply wheat.

The North Indian miller said wheat (dara) prices could top Rs 11,000 a quintal. "The measures undertaken by the Centre, especially to clamp stock limits, have not yielded any results."

Mr Mohan said that prices could increase by at least Rs 50 from here, but expected it to stabilise thereafter since the new crop will be due in March. Mr Pramod Kumar said that prices are likely to rule firm in view of availability shortage.

Trade sources said: "The Centre's last weapon was to import more and that has not yielded any result. The only other option before it is now open sale."

On the other hand, prices on the futures market are ruling lower than spot. The rates are also not witnessing the volatility that is being witnessed in the spot market.

"That is because you have to foot a 34 per cent margin for trading in wheat futures," said Mr Pramod Kumar.

On Tuesday, wheat for September delivery was quoted at Rs 968 a quintal on NCDEX and Rs 9982 on MCX. October contracts are ruling at Rs 993 on NCDEX and Rs 1,004 on MCX, while December contracts are quoting at Rs 1,021 on NCDEX.

In the global market, wheat is in correction mode, with November contracts ruling at $178 on Euronext. On the other hand, indications are that the prices could gain with investors cutting their short positions on the CBoT.