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Our Bureau

Mumbai, Nov 9

In its latest Food Outlook, the Food and Agriculture Organisation (FAO) has confirmed, if any confirmation was needed, the worsening of world wheat demand-supply fundamentals.

To meet global consumption requirement of 618.7 million tonnes, output would aggregate 602.1 mt necessitating a large drawdown of stocks. Ending stocks for 2007-08 would be down 10 per cent to 142.6 mt, the lowest levels in last 25 years. No wonder, wheat prices have remained strong.

The silver lining is that early prospects for wheat production in 2008 appear favourable, on current reckoning. Higher acreages are expected in the US, Canada and Europe. Following this, wheat futures prices for forward positions have considerably eased.

For July 2008 delivery, the current quote is $248 a tonne, the report pointed out adding that this price is already well below the delivery prices for December 2007 and March 2008. Amid tight export availability and strong export prices, wheat imports have declined from previous years record level by some 6 mt to 107.5 mt in 2007-08.

According to the FAO, India is forecast to purchase no more than two mt from the world market this season, against the initial forecast of three mt. In 2006-07, India’s imports were a record 6.7 mt.

The surge in this seasons world prices coupled with improvements in India’s own supply situation, following a strong rebound in production and more comfortable inventory levels, are the reasons for anticipating smaller imports in 2007/08, the report pointed out.

In October, India announced a ban on exports of wheat flour while prolonging the ban on wheat exports, already in place since February. On the eve of the new sowing season, the Government also decided to increase the price it pays farmers (minimum support price) by nearly 18 per cent (to Rs 1,000 per 100 kg) to further boost plantings, the report added.

Pointing out that international prices have reached an all-time record in the case of oilseeds and 23-year and 34-year high for oils and meals respectively, the Food Outlook attributed the extra-ordinary price rise to oilcrop markets that have come under the direct influence of developments in the related feed grain market.

With maize (corn) and soyabean both facing rising demand in the feed as well as the energy market, and thus increasingly competing for land, the unprecedented surge in international maize prices has spilled over to the oilseeds and meal market, and in particular to the soyabean complex.

Furthermore, steadily growing biodiesel requirement led to increased demand for vegetable oils, notably soyabean, rapeseed and palm oils, the report said adding, this trend, combined with a constant rise in consumption of vegetable oil as food and weak growth of total oil production in 2006-07, has led to a gradual tightening in global supplies, thus explaining the recent surge in vegoil prices. Prices are expected to remain firm.

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Wheat futures easing, vegoils to stay firm

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