The Hindu Business Line : Wheat prices continue to scale new highs

Wheat prices have begun to scale fresh peaks every day with the rates touching Rs 1,161 a quintal in New Delhi on Thursday. Since the beginning of this month, the prices are hovering above Rs 1,100 a quintal.

In the futures market, November contracts ruled at Rs 1,117 a quintal and December contracts at Rs 1,147 on NCDEX, while on MCX, December contracts ruled at Rs 1,115. Similarly, contracts till March are ruling above Rs 1,100, while for April, the contracts are quoted at Rs 941 on NCDEX.

No supply woes

"One reason for wheat prices ruling firm is that the Centre has made it clear that private parties will not be allowed to import wheat after December 31," said Mr Pramod Kumar of the Bangalore-based Belgaum Flour Mills. "Supply seems to be no problem but the costs are higher," he said.

Till November 15, 26 lakh tonnes of the 55 lakh tonnes contracted for import had arrived, an official press release said. Imports on the Centre's account are likely to continue till March 31. The Centre resorted to imports after seven years as production declined to 69.08 million tonnes this year.

Spot higher

Spot prices are higher than futures as contracts on NCDEX are coming to an end and there is more demand in the physical market, according to trade sources.

But Kotak Commodities Services Ltd (CSL) Research said futures prices were lower mainly since quality problems were anticipated with goods lying in NCDEX warehouses.

"The material lying in NCDEX warehouses could be very much at the end of its revalidation cycle. The long storage period could have altered the quality specifications of the goods to some extent, which means that the goods if sold in spot markets will attract a discount," according to Mr Ajoy Pathak, Vice-President and Research Head, Kotak Commodities Services Ltd.

Mr Kumar said stocks should be available even during March, though the prices at which they would be available would have to be seen.

According to a North India miller, wheat prices declined by Rs 20 a quintal on Thursday to Rs 1,140 but there were no sellers.

"It is the same story every time. Prices decline and there are no sellers. Then, prices tend to rise by Rs 5 each day to top the previous high," the miller said.

In the North, especially in Ghaziabad and Hapur, the mills are having to fork out Rs 1,200 a quintal. "Discounts are available on cash transactions in places such as Agra," the sources said.

However, if any mill required higher quantity, then it had to pay a premium of at least Rs 15 a quintal.

Millers do not see any chance of prices declining before the arrival of the new crop begins late in March.

"What is surprising is that prices aren't declining despite lack of demand for wheat products," said the sources.

Sowing trend

Mr Pathak said prices would rule firm till January-February and a downtrend was possible after that. In fact, the declining trend could begin in that period itself since reports of sowing trend were encouraging.

"Farmers are shifting to wheat as spot prices are ruling much higher but the price trend faces a few risk, especially weather, which is a key motivating factor," he said.

Mr Kumar said a clear picture of the sowing trend would be available only around December 15 but still, weather thereafter held the key to a good crop and price trend.

Trade sources said sowing was progressing well but said any adverse weather condition as witnessed during the last two years could change market conditions.

As of now, wheat acreage is up 69 per cent at 26.27 lakh hectares compared with the corresponding period last year.

According to Mr Pathak, key factors that would determine prices next year are low stocks in the pipeline, buffer stock purchase by Government agencies and commercial contract farming.