The Hindu Business Line : Mills unruffled by Pak stopping wheat export

Market behaviour
Spot prices for wheat (Dara) declined by Rs 5 a quintal to Rs 910-915 in New Delhi.
Desi wheat prices, too, slid to Rs 1,837 a quintal from Rs 1,850.

Chennai May 24 Flour mills, especially in South India, are unruffled by Pakistan's move to suspend wheat exports. Islamabad on Wednesday decided to suspend wheat exports as domestic prices have begun to surge. Its Economic Coordination Committee ratified the decision.

"No consignment is being loaded from the Pakistan ports. Some of us have opened letter of credits (LC) for buying wheat," said an importer.

Uncertainty

One importer in the South had opened LC for 10,000 tonnes and also has contracts sewn up for buying another 10,000 tonnes. "I am not sure what will happen. If the consignments for which LC has been opened are not loaded, I will lose heavily," the importer said.

According to Mr Pramod Kumar, President, Karnataka Roller Flour Mills Association, about 1,500-2,000 containers (of 22 tonnes each) had to come from Pakistan.

Mr Kumar, who is also Executive Director of Belgaum Flour Mills, said his firm had contracted 100 containers of which 40 had been received. "We are not sure what will happen to the rest," he said.

Prices drop

But analysts and industry players such as Mr Kumar are of the view that Pakistan's move to suspend exports will not have any effect.

Their views were supported by the market behaviour. Spot prices for wheat (Dara) declined by Rs 5 a quintal to Rs 910-915 in New Delhi. Desi wheat prices, too, slid to Rs 1,837 a quintal from Rs 1,850.

"There is no problem of stock availability. Plenty of wheat is available and, therefore, we are not worried," said Mr R.K. Mohan, President, Tamil Nadu Roller Flour Mills Association.

According to Mr Si. Kannan, Associate Vice-President, Kotak Commodities Services Ltd, wheat is available within the country and on the other hand, Pakistan would not be able to sell anywhere but India in view of higher freight charges.

"Pakistan's move is temporary. It will go soon. Also, we have stock at least till November," said Mr Mohan. "Wheat is available in Punjab, Haryana and Uttar Pradesh. So, there is no cause for alarm," said Mr Kumar.

Flour mills, on the western coast and in the South, opted for Pakistan wheat as it costs them less when compared with domestic wheat. For example, wheat imported from Pakistan cost the mills around Rs 10,700 a tonne at their gates in the South, while domestic wheat costs Rs 11,500.

This was mainly since the Centre had raised the minimum support price for wheat to Rs 850 a quintal. "Farmers are not willing to sell below Rs 850 a quintal," said traders.

Pak exporters upset

"We hope farmers will come to the market with their produce in the next couple of months. If the Centre does not extend its procurement for buffer stocks beyond May 31, then panic can set in among farmers," said a miller. "We don't see the price rising anymore. It could continue to rule stable at current levels," said Mr Mohan.

Pakistan's exporters, on the other hand, are upset over their Government's move. While total exports are said to be around three lakh tonnes, negotiations are on for four lakh tonnes.

Pakistan's production is projected to be 22 million tonnes (mt) against estimated consumption of 19 mt. It also has four million tonnes carryover stock from last year.

India's production, on the other hand, is expected to be 73.68 mt against last year's 69.3 mt. It is likely to import at least three mt of wheat, both through private and Government initiatives. However, the Centre's move to import wheat has been stalled by sellers coming up with quotes above $260 a tonne.

Global prices, which had increased on Indian tender, were also likely to decline in the near-term, Mr Kannan said.

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