The Hindu Business Line : Wheat offtake contained below 12 million tonnes

New Delhi June 17 With international wheat prices scaling new peaks, the Centre is caught in a cleft stick over its planned 20 lakh tonne (lt) import tender by the month-end.

CBOT prices

The week just ended has seen prices at the Chicago Board of Trade cross the psychological $6-a-bushel mark or $220 per tonne (one bushel=27.216 kg) for the first time in 11 years. After hitting a high of $6.33 on Thursday, the September futures contract closed the week at $6.21 a bushel or $228 per tonne.

Likewise, November wheat at the Euronext.liffe exchange touched an all-time record of 181 per tonne on Thursday before settling at 176.50 or $235 per tonne. At these levels, if one were to add freight cost of $65-70 from Europe and $70-75 from the US, the landed price of imported wheat in India would work out to around $300 per tonne.

Russian origin

Even the less-preferred Black Sea origin wheat from Russia — Ukraine has currently clamped down on exports — would be available for no less than $280 per tonne. Compare this to the average $205.31 at which State Trading Corporation of India (STC) had imported 55 lt last year.

The current levels would exceed even the $263-per-tonne rate that STC had negotiated for 3.06 lt out of a 10 lt tender it floated last month — which was rejected as being too high by the Centre.

But the way the sentiment has changed, the $263 prices that was considered "too high" a fortnight ago will now seem a virtual steal. The trigger for the present bullishness has been a US Department of Agriculture report, released earlier in the week, projecting global year-ending wheat stocks for 2007-08 at 112.03 million tonnes — a 30-year-low. This, in turn, is attributed to the drought in Ukraine and an abnormally hot spring in Russia, along with concerns of crop damage due to excess rains in the US.

Import plans

While all these may upset the Centre's import plans, it can, nevertheless, draw comfort from the Food Ministry's latest offtake data, showing the total lifting of wheat from the Central pool during 2006-07 at 117 lt. The low wheat offtake has been compensated by higher lifting of rice, which has helped maintain overall grain supplies to the targeted public distribution system (PDS) at around 310 lt. During the 2007-08 season, public wheat procurement is expected at 110 lt, which, with opening stocks of 45.63 lt, will confer total availability of 155 lt. Assuming offtake to be controlled at 120 lt, the closing stocks of 35 lt will be a tad below the minimum buffer norm of 40 lt for April 1. The import requirement would, then, be limited to about 20 lt rather than the 50 lt currently being targeted. These could even be spaced out during the year, so as to not aggravate the current volatile global situation.

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