The Hindu Business Line : Wheat prices seen ruling steady at Rs 1,100/quintal

Outlook
Cold spell and rains in the growing areas seen conducive to the crop’s progress.
New wheat crop expected to arrive in Gujarat towards the end of February.

M.R. Subramani

Chennai, Jan. 22 Wheat prices are unlikely to drop below the Rs 1,100 a quintal-mark this year despite the rates declining by nearly Rs 30 since the beginning of the week. “With the Centre fixing Rs 1,000 a quintal as minimum support price (MSP) for wheat this year, prices are unlikely to rule below Rs 1,100,” said trade and industry players.

Causes

“Some of the small players have been bringing stocks to the market on reports of the current cold spell helping the standing crop. Improvement in coverage of the crop has also led to the fall in prices this week,” they said.

According to the Agriculture Ministry, wheat production could touch 75 million tonnes (mt) this year or is expected to be around last year’s level of 74.89 mt. As per the latest data on rabi crop sowing, nearly 275 lakh hectares have been brought under wheat cultivation, against 281 lakh hectares during the corresponding period a year ago.

Though coverage of the crop trailed initially, late sowing has helped to a great extent. With the cold spell and rains in the growing area being seen as conducive to the crop’s progress, its prospects have brightened. Lower temperatures at night have also proved beneficial.

Price map

Wheat (dara) prices, which hovered around Rs 1,050 a quintal until the beginning of this year, have gained during the last fortnight. Last week they touched Rs 1,147 a quintal, off the record high of Rs 1,161 a quintal registered in November 2006. On Tuesday, they were quoted at Rs 1,118 against Rs 1,112 on Monday.

“Prices have gained since the beginning of the month as stocks have depleted. There are no stocks in Punjab or Haryana. Even in Uttar Pradesh (UP), traders say they don’t have stocks,” said Mr Raj Sud, a trader in Khanna market.

“Prices have gained mainly on fears that the crop this year could be 3-4 per cent lower than last year,” he said.

According to Mr Vinod Kapoor, Chairman, Wheat Products Promotion Society, small traders who held back some quantity have all sold, while big ones who still hold stocks have begun to make profits.

“Now is the time for big traders who have been holding stocks to make money. Prices could see some decline after the middle of February. We shouldn’t be surprised if they decline to Rs 1,050-60 level,” he said. But traders discount prices slipping below Rs 1,100 a quintal since they say sales tax, mandi fees, commission and other levies could make prices higher.

According to Mr Kapoor, new wheat crop is expected to arrive in Gujarat towards the end of February.

“Prices have also increased as the UP Government has introduced 4 per cent value-added tax on the total installed capacity of flour mills,” industry sources said.

Lower wheat production and buffer stocks in 2006 forced the Centre to import 55 lakh tonnes of wheat, while last year it contracted to import around 18 lakh tonnes despite a higher crop. The Centre said imports were made for buffer stock purpose.On the other hand, global wheat production being hit by vagaries of the weather and rising demand have contributed to the grain’s prices almost doubling in the world market.

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