Wheat prices zoom to record Rs 1,000 a quintal

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Maida rates increased; Sept futures below spot market

TOUGH TIMES AHEAD: Workers of a roadside eatery busy kneading flour to prepare
TOUGH TIMES AHEAD: Workers of a roadside eatery busy kneading flour to prepare "roti" in Kolkata on Friday. With prices rising sharply, customers may now have to shell out more for wheat-based food and products. A. Roy Chowdhury

M.R. Subramani

Chennai, Aug. 18

Wheat prices touched a record Rs 1,000 a quintal in New Delhi, surpassing the earlier rate of Rs 985 on February 4 this year. And indications are that consumers will have to shelve more for maida, sooji, bread and biscuits.

"For the first time, wheat prices have seen a rise of Rs 100 within a week," said Mr Pramod Kumar, Executive Director, Sunil Agro Foods Ltd. "This has made things difficult for mills in the South, which will have to pay at least Rs 1,170 a quintal at Bangalore," he said.

Futures trail

Wheat (dara) was quoted between Rs 995 and Rs 1,000 a quintal, while in Hapur, it ruled at Rs 972. Quite unusually, September contract prices trailed spot prices. In the futures market, September contracts were quoted at Rs 973.60 a quintal on NCDEX. October contracts were quoted at Rs 996.50 on NCDEX and Rs 1,009 on MCX. On NCDEX, November contracts ruled at Rs 1,008; December at Rs 1,021; January and February over Rs 1,034.

"It seems to be a clear sign of scarcity. We don't think anyone would be hoarding at this price. Despite the rise in prices, there are no signs of supplies within the domestic market," said Mr M.V Balasubramanian, Managing Partner of the Salem-based Narasu's Roller Flour Mills.

"We do hear that supplies are available, though we are not getting any offer," said Mr Kumar.

Chasing supplies

The current situation has led to a scenario wherein the roller flourmills have been left chasing whatever meagre quantity they could lay their hands on. "Indeed, we now hear that some mills are prepared to pay brokerage for getting them the supplies. Normally, it is the seller who pays," said a flour miller.

"We don't think we have come to such a situation," said Mr Kumar.

Mr Balasubramanian said mills were hard pressed for their raw material since they had capacity to stock one or two months of their requirement only.

"If the situation is worrisome in August itself, we shudder to think what will happen during the next seven months before domestic wheat starts arriving in the market," he said.

By-products prices hiked

With wheat prices zooming, flour millers have now resorted to hiking the product prices. Maida prices were on Friday increased by Rs 100-150 for a 90-kg bag from the current Rs 1,200-1,250. "This is just the beginning. Consumers should expect another round of hike," Mr Balasubramanian said.

Sooji (rava) prices too were being hiked, he said.

"Bakery products and biscuits will now cost more. Why, if you go to any eatery to have roti, parotha or poori, you may have to shell out more," Mr Balasubramanian said.

In view of the current situation, the trade now expects the Centre to allow wheat import by private parties duty-free. "Even then, we will have to pay more. See, for example, when the State Trading Corporation (STC) first floated a tender for five lakh tonnes of wheat, it was offered at $ 190 a tonne. In its latest tender finalised last week, it had to pay $ 220," Mr Balasubramanian said.

STC has so far contracted to buy 37.80 lakh tonnes of wheat to build buffer stocks for the Centre. It has been allowed to buy wheat duty-free. According to trade sources, it could float tenders soon to import another 18 lakh tonnes.

On the other hand, the Centre has said the private trade had obtained permission to import nearly 15 lakh tonnes of wheat. However, trade sources said at the most, around two lakh tonnes of wheat could have been contracted for import at a concessional 5.2 per cent duty. Imports at concessional duty will be permitted until December 31.

Global situation

The Centre had to resort to wheat imports as bufferstocks declined and production was hit by adverse weather conditions. Initially, production was estimated at 75.05 million tonnes. Subsequently, it has been pruned to twice to 69.48 million tonnes now.

"The global situation isn't too bright. Going by the response to Indian tenders, the prices have gone up by $ 30 a tonne. This rise within a short span of time isn't small in the global market," said trade sources.

Related Stories:
Bunching of imports driving up wheat prices
Wheat output estimate pruned to 69.48 m tonnes
Govt allows duty-free wheat imports by pvt trade

(This article was published in the Business Line print edition dated August 19, 2006)
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