Futures continue to rule above Rs 1,000/t for Dec contracts

M.R. Subramani

Tight situation


Farmers holding

back stocks in view of higher futures rate.

Buffer stocks

procurement at 82 lakh tonnes, down 35 lakh tonnes.

Arrivals are

poor and have dwindled to a trickle.

Chennai, April 26

Wheat prices have firmed up further after the Union Government's announcement of a bonus of Rs 50 a quintal over and above the minimum support price (MSP). Despite the bonus, farmers continue to hold back stocks as futures continue to rule strong above Rs 1,000 a quintal.

The Union Government on April 21 announced the bonus above the wheat MSP of Rs 650 a quintal besides saying that it would import 30 lakh tonnes of wheat in addition to the five lakh tonnes contracted from AWB Ltd of Australia.

PRICE INCREASE

"The announcement of bonus for wheat has helped prices rise that much," said Mr Pramod Kumar, Executive Director of Belgaum Roller Flour Mills.

"The wheat prices in the open market before auctions have increased to Rs 730 a quintal from Rs 700 earlier," said Mr Vinod Kapoor, President of Wheat Products Promotion Society.

At Hapur, wheat dara prices currently rules at Rs 810 a quintal from Rs 805 on the day the bonus was announced, while in New Delhi, the prices for the same variety have increased to Rs 822/825.

FUTURES RATE

On the NCDEX, wheat for December delivery has increased to Rs 1,058 from Rs 1,019 on April 21. August contracts are a notch below at Rs 993 a quintal. On the MCX, July contracts have increased to Rs 981 from Rs 948, while on NCDEX it is quoted at Rs 985.

TRADERS SEEK MORE

"In Punjab and Haryana, traders are seeking Rs 50 more for a quintal on consignments already contracted. As a result, there has been no loading of wheat to mills in the South," Mr Kumar said.

"The bonus and import announcements have created a sort of panic in the market," traders said.

HELP IN PROCUREMENT

Mr Kapoor said the bonus announcement had in a way helped in better procurement of buffer stocks by the Food Corporation of India (FCI). "The Centre has been able to make some procurement after the announcement. But it is still less than the quantity procured during the same time last year. Besides, the private trade has procured 15 lakh tonnes. Mutli-national companies have all bought their requirement from Haryana," he said.

BUFFER STOCKS

According to the Food Ministry, procurement for buffer stocks till April 25 was 82 lt against 117 lt during the same period a year ago.

Flourmills in the South are, on the other hand, facing problems of railway wagons availability. "We are allocated only two wagons a week, which has resulted in stoppage of loading," Mr Kumar said. "Though wheat is available in Delhi market, the quantity is little. There is lot of confusion the market," he said.

ARRIVALS DWINDLE

Mr Kapoor said arrivals had dwindled and were poor now. "At least 10-20 per cent of the crop should be left with the farmers and trade. But they are holding back as futures prices are higher. They expect to make gain by delaying their sales," he said.

According to traders, the growers are reporting at least five per cent fall in production from last year. The Centre, on its part, is yet to comment after pruning wheat output to 73.06 million tonnes (mt) from initial estimates of 75.5 mt. This is against 72 mt produced during the last two years.

Related Stories:
Wheat worries
Wheat Dec futures price tops Rs 1,000 a quintal
Rs 50 bonus for wheat growers

(This article was published in the Business Line print edition dated April 27, 2006)
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