The Hindu Business Line : World wheat prices may rise

Forecast
The London-based International Grains Council has made a preliminary forecast of 645 million tonne global wheat output for 2008-09, up over 40 mt . from 2007-08.
Should the crop size materialise, there would be some respite from high prices; but not until then.

G. Chandrashekhar

Mumbai, Jan. 2 At least in the short-run, world wheat prices could rise further as countries impose export tax or raise it further, according to available indications. For instance, Russia has announced that it would hike export tax on wheat to 40 per cent of the customs value, but no less than €105 per tonne. The current level is 10 per cent, but not less than €22 a tonne. The duty hike is expected to become effective by the end of this month.

China too has proposed an export tax of 20 per cent on wheat and 25 per cent on wheat flour in 2008. The country is the world’s largest wheat producer.

Shipments

In the last three-four months, Russian wheat shipments have propelled on strong demand from West Asia and the Mediterranean region, with export supplies from the European Union shrinking and Ukraine imposing highly restrictive export quota.

Rising crude market

Ocean freight rates have remained strong because of rising crude market; and here again Russia has a logistical advantage in terms of proximity to consumption markets. Admittedly, Russian wheat prices are consumer-friendly on grounds of quality. World wheat demand stays unabated partly for food consumption and to a lesser extent for ethanol, while inventories hit record lows. The next major harvest in northern hemisphere is months away. Expectation of a 4 per cent expansion in world wheat acreage for 2008-09 is a positive sign.

The London-based International Grains Council has made a preliminary forecast of 645 million tonne global wheat output for 2008-09, up over 40 mt . from 2007-08. Should the crop size materialise, there would be some respite from high prices; but not until then.

How India would cope with such market conditions, given its suspect wheat crop prospects, remains to be seen.

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