The Hindu Business Line : Rising domestic wheat prices worry millers

Wrong signal
Canvassing agents favouring private trading firms
These firms offering higher prices and blocking access to millers
Prospects of a fall in wheat prices bleak

M.R. Subramani

Chennai, July 2 The domestic wheat market has turned murky with millers unable to get required stocks directly from the market. Stocks are available but they are offered at higher prices from private trading firms.

“Wheat is not easily available to us from the market. Canvassing agents who earlier offered wheat on behalf of growers are now campaigning in favour of big private trading firms. They say we can get wheat from these private firms at a price higher than what is prevailing in the market,” said a flour miller based in Tamil Nadu.

BLOCKING ACCESS

A miller based in North India said these firms were offering higher prices and blocking access to millers.

“It is evident that these private firms have assured higher prices to the growers or sellers and they are not offering wheat at market rates,” he said.

“Since these firms have to report to the Centre on the stocks they possess and the quantity they buy, they are holding it through traders,” the Tamil Nadu miller said.

Analysts and millers point fingers at the procurement of over 12 lakh tonnes (lt) of wheat on private account as the primary reason for the trend.

“Some of the canvassing agents say they could get us wheat from agencies such as AWB. They are ready to offer us even 200 tonnes provided we pay a higher price,” said the Tamil Nadu miller. Sources say the premium is around Rs 75 a quintal.

JUMP INTO FRAY

With the Government agencies stopping purchase for buffer stocks in Punjab and Haryana after May 31, millers say prices should have begun to decline. “But once the Government and its agencies withdrew, the private trade jumped into the fray and the whole scenario has turned murky,” said a North Indian miller.

However, procurement continues in Uttar Pradesh and according to millers, the Government has taken the help of commission agents for mopping up stocks.

According to the Ministry of Agriculture, procurement in Uttar Pradesh this year is 5.04 lt against hardly half a lakh tonnes last year. Procurement in Rajasthan and Madhya Pradesh is also better than last year.

“The problem we face is that wheat (dara) prices which ruled at Rs 900 a quintal on May 31 have now increased to Rs 975-980. As a result, the price of wheat that will be delivered at mills in the South will be around Rs 1,200 a quintal,” said the Tamil Nadu-based miller.

“Prices had reached this level only around October last year. But this year, prices have already touched the Rs 1,200-mark now and we are not sure where we are heading to,” he said.

Grain arrival

With wheat arrival almost over in Punjab and Haryana, the grain arriving in Uttar Pradesh is being quoted higher. “Uttar Pradesh wheat is being quoted at Rs 10 a quintal premium over other States. That leaves us with wheat in Rajasthan and Madhya Pradesh,” said millers.

Madhya Pradesh seems to be a viable choice in view of lower charges for transport.

Millers see the prospects of a fall in wheat prices bleak. “Big private players who procure wheat pay Rs 17 a bag of 100 kg as storage charge per month. Now, if it were to be delivered after three months, the storage charge is Rs 54. Do you think, they will forego the storage charge and sell at loss?” millers asked.

In view of rising wheat prices, wheat products’ prices are expected to rule firm. For example, fair average quality maida prices have been hiked by Rs 25 a bag of 100 kg in the South this month from Rs 1,370. “We have been forced to increase the prices,” millers said.

On the other hand, analysts and millers say domestic wheat prices could sway the way in which global rates swing. Though prices have slipped from over $6 a bushel or $220 a tonne last week to $5.92 or $217.