The Hindu Business Line : Wheat prices drop as growers bring out stocks

Differing views
A section of traders feel that prices will start to rise from next week.
With mills holding sufficient stock scope for price rise may be limited, say millers.

M.R. Subramani

Chennai, July 17 After gaining about Rs 40 a quintal last week, wheat prices have turned soft this week. But traders feel the softness will be short-lived and prices could rise again as demand is likely to emanate again.

With wheat prices touching Rs 1,000 in mandis such as Khanna, Asia’s largest grain market, farmers have tried to cash in bringing in the stocks they had been holding. “That has also led to some correction in the prices,” says Mr Raj Sud of Sud Brothers in Khanna, Punjab.

In New Delhi, wheat (dara) was quoted at Rs 1,037 a quintal on Tuesday, down Rs 15 from Monday.

“Prices in Khanna have slipped to Rs 970 (on Tuesday) from Rs 1,000 last week. At the same time, arrivals too have increased from 50 tonnes to 100 tonnes daily,” Mr Sud said.

“Prices in the last two days have declined by over Rs 300 a tonne mainly since farmers are bringing their produce to the markets. But we expect prices to rule at around Rs 1,000-1,025 a quintal in the short-term,” says Mr Vinod Kapoor, President of Wheat Products Promotion Society.

‘Sufficient wheat’

According to Mr Sud and Mr Kapoor, the wheat market currently depends on demand from flour mills in the South.

“The mills in the South have bought whatever they want and therefore, the market is in a silent mode,” Mr Sud said.

“There is no clamour for wheat stocks from the South. Mills in the North have enough stocks to last the season,” Mr Kapoor said.

According to Mr S. Pramod Kumar, Executive Director of Sunil Agro Foods, flour mills in the South have enough stocks. “Not only that, we also have enough stocks for the public distribution system. We had a carryover stock of 49 lakh tonnes and 111 lakh tonnes of wheat were procured. With wheat requirement for public distribution coming down to eight lakh tonnes a month, we have more than enough of wheat,” he said.

“Wheat prices had gone up very high in a short period. It has to come down,” said Mr R.K. Mohan, President of Tamil Nadu Roller Flour Mills Association.

Correction?

Flour mills in the South are currently getting wheat at Rs 12,000-12,500 a tonne.

“This is much lower than the price at which the Centre has contracted wheat for imports. That cost, including freight handling, comes to around Rs 13,700 a tonne. Therefore, we think there is some scope for prices to rise,” says Mr Sud.

“Whenever there is a sudden increase in price, there will be pressure for correction. We are seeing that now. Once it gets over, we could see prices rising again, mostly from next week onwards,” he said.

However, Mr Kapoor and other such as Mr Kumar and Mr Mohan feel there is not much scope for prices to increase.“One, mills are in no hurry to buy. Two, growers have begun to bring their stocks out. Currently, they are busy sowing kharif crops. Once that is over, they may feel compelled to liquidate their wheat stocks since they could get affected. Unless demand emanates, scope for prices to rise is limited, at least until early September,” says Mr Kapoor.

Private trade

Mr Sud agrees that farmers are holding on to stocks. “In Punjab, growers alone hold 4-5 lakh tonnes,” he says. However, he begs to differ with the views on price. “There is definitely 10-15 lakh tonnes wheat supply shortage and therefore, prices should gain,” he says.

Mr Kumar and Mr Mohan said the private trade would not be importing in the current scenario. “Australian wheat will start arriving from November. We will get at current prices then,” says Mr Mohan.

“Private trade imports are ruled out as of now,” says Mr Kumar.

Wheat prices have gained this year despite projections of 74.89 mt against 69.35 mt last year. Despite hopes of a higher crop, the Centre has decided to import 5.11 lakh tonnes of wheat at an average $325.59 a tonne c&f.