The Hindu Business Line : Wheat shipment from Pak arriving next week

Price advantage
Pakistan wheat at mill gates is expected to be around Rs 10,700 a tonne.
In contrast, domestic wheat will cost Rs 11,500 a tonne.

Mumbai/Chennai April 20

Pakistani wheat is set to enter the country soon. About 200 container loads (18 tonnes each) totalling some 3,600 tonnes are expected to reach Tuticorin port in Tamil Nadu next week (around April 24).

It will be the first consignment of imported wheat to enter the country this season from the neighbouring country.

Cheaper alternative

Roller flour mills in South India are importing the consignment from Pakistan as they find it cheaper than buying it from the domestic market. While mill sources put the contracted quantity at around 2,000 containers, trade sources said nearly 8,000 containers (totalling about 14,500 tonnes) would be imported from Pakistan.

The import price of Pakistani wheat is reported to be $225 (Rs 9,400) a tonne c&f. However, a trader importing wheat on behalf of the mills put the price at $232 (Rs 9,690). Some consignments are expected to arrive in Chennai.

"The phyto-sanitary certificate for bringing in the first consignment has been received and we will start loading the consignment in Karchi anytime," trade sources said.

All the consignments are set to come by container and shipments are expected to continue till May-end.

Offers from Russia are at $238 (Rs 9,950) a tonne c&f ; but many expect the prices to decline somewhat to $225 by July when the new Russian harvest begins.

"It makes sense for us (to buy from Pakistan) since port-based mills can get the wheat at their gates for around Rs 10,700 a tonne. For mills away from the ports, the cost could be Rs 11,200. On the other hand, given the minimum support price of Rs 850 a quintal for domestic wheat, it would cost us Rs 11,500 at our gates," said a miller.

Mr R.K. Mohan, President, Tamil Nadu Roller Flour Mills Association, said since the Centre had raised the MSP to Rs 850 a quintal, it was unlikely that the mills would get domestic wheat at a lower price.

Win-win situation

According to trade sources, imports through containers helps them to buy small quantities. The import by container is a win-win situation for the millers as well as the freight operators. These containers would have carried goods to Karachi and would have to return empty most of the times. By agreeing to ship wheat at a nominal rate, they would ensure the container doesn't return empty at least part of its journey back. For the millers, they are able to get small quantity at a lower freight.

"Last year, we even got an offer to provide wheat through container at $17 a tonne from Australia," a miller said.

Prices look up

Meanwhile, in New Delhi, wheat (dara) was quoted on Friday at Rs 960-962 a quintal, up Rs 2 from Thursday's close. Wheat prices, which looked like dropping last week, have looked up this week on slow arrivals and demand from flour mills. Wheat arrivals are slow as farmers have resorted to manual harvest to take advantage of higher prices for straw. Manual harvest will help them to sell straw in the market, which now rules at Rs 5 a kg against Re 1 a kg last year.

This year, wheat production is expected to be 73.7 million tonnes against 69.35 million tonnes last year.

Pakistan, on the other hand, is expected to harvest a record 23 million tonnes crop and it is projected to have four million tonnes surplus for exports.

Trade sources are, however, keeping their fingers crossed to see if Pakistan wheat is imported without any problem. Already, a consignment from Pakistan shipped a couple of weeks ago ran into quality problems and had to be diverted to another market (most likely Myanmar), a trader remarked.

Millers and traders, however, say Pakistan wheat quality should match Indian specifications and problems could only be with regard to trash and foreign content.

However, given Australia's uncertain crop conditions, the international wheat market may not ease. Indeed, global consumption is projected to rise by about 15 million tonnes (mt) in 2007-08 to 622 mt due to greater feed use as feed grains such as corn (maize) would face tighter supplies and firm prices.

Despite a better crop, the country is expected to import at least 30 lakh tonnes of wheat this year as against 55 lakh tonnes imported by the Centre and another 20 lakh tonnes by the private trade last year. India had to resort to imports last year as buffer stocks declined sharply during the last two years and demand was also rising.

Imports were facilitated by the Centre reducing the import duty on wheat to zero. The facility has now been extended till December.

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