The Hindu Business Line : Continuous arrivals keep local wheat prices soft

Current scenario
Though prices are under control, traders hope they could rise by Rs 1,000-1,500 a tonne in the medium-term.
Currently, wheat is available in Khanna market at around Rs 9,450 a tonne. Arrivals in the Khanna market are estimated at 100 tonnes.

M.R. Subramani

Chennai, Sept. 18 Last week, wheat prices on the Chicago Board of Trade (CBoT) topped a record $9 a bushel (of 27.2 kg). That converted in rupee terms is nearly Rs 13,500 a tonne. On the other hand, domestic wheat prices on Tuesday were quoted at Rs 10,050-10,100 a tonne.

Last year, wheat prices in the country generally ruled around Rs 11,000 a tonne and at one point of time touched a record Rs 11,610 a tonne in the country. Then, it was claimed that prices in the domestic market were rising in tune with the movement on CBoT. Why then are domestic prices not in tune with global prices now?

“Wheat is available in the market in plenty. Adequate supplies are available from Rajasthan and Madhya Pradesh,” says a wheat trader in Punjab’s Khanna, Asia’s largest grain market.

‘No shortage’

“Wheat is coming to the market from all growing regions and no shortage is being felt,” says Mr Vinod Kapoor, President of Wheat Production Promotion Society.

Though prices are under control, traders hope that they could surge by another Rs 1,000-1,500 a tonne in the medium-term.

Currently, wheat is available in Khanna market at around Rs 9,450 a tonne. “If prices touch at least Rs 10,000 excluding levies, farmers could come forward to sell more,” says the trader.

Arrivals these days in the Khanna market are estimated at 100 tonnes.

“There is no question of any shortage or lack of stocks in the domestic market. We think farmers, traders and brokers all put together should be holding 4-5 lakh tonnes of wheat,” says the trader.

Agrees Mr Kapoor: “There could be more arrivals if the prices improve. The farmers are expecting Rs 10,000 a tonne for themselves. Though prices are currently at this level, they do not get all since there are various levies they have to pay to the Governments,” he says.

Right now, wheat arriving in the market is from godowns. “These are stocks that are threatened by infestation. So, farmers are regularly bringing them to market,” Mr Kapoor says.

“More wheat is there in the warehouses. That will move out only if the prices improve. Prices are also not moving up since flour mills are well stocked and there is no demand from their end,” he says.

Pricing mechanism

Trader sources also attribute the soft domestic prices to lack of a mechanism to find price levels. “Last year, the futures were there to find a price level. This year, futures are not there and as a result, we don’t find much movement,” the sources said.

This year’s production has been estimated higher at 74.89 mt against 69.35 mt last year. Besides, nearly 13 lakh tonnes have been contracted for imports by the State Trading Corporation, while at least 40 lakh tonnes of the 55 lakh tonnes imported last year are lying in the warehouses.

Meanwhile, traders and industry players have discounted reports from the press in Pakistan that wheat from the neighbouring country is being smuggled across the Wagah border into India.