Wheat prices gain as arrivals peter out

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Wheat prices have risen by about a tenth over the past two months, on lower-than-anticipated output, forcing large buyers such as flour millers to scout overseas markets, including Australia and France, to secure their supplies.

Millers have already started contracting wheat imports in anticipation that the Centre will either roll back or tweak the 25 per cent import duty currently in force till June 30.

Import volumes could see a sharp increase once a clear signal emerges from the Government on the duty front.

On Friday, Food Minister Ram Vilas Paswan had indicated that the government, which is keeping a close watch on prices, may scrap the import duty if the wheat prices continue to rise.

The Agriculture Ministry, in its third advance estimate, had pegged wheat output at 94.04 million tonnes (mt), higher than the previous year’s final output of 86.53 mt.

However, the trade is sceptical about the government’s estimate and pegs the domestic wheat output to be between 81 mt and 84 mt, because of lower acreage, poor weather and drought in several States impacting the output.

Lower procurement

Wheat procurement by the government agencies, which is nearing completion, has been down by about a fifth to around 23 mt — down from last year’s 28 mt and the targeted 30 mt.

“All indicators — the rising prices, lower procurement and the government’s willingness to reduce import duty — point to a decline in domestic production,” said Tejinder Narang, grains trade analyst.

The Centre should reduce the duty and facilitate the imports to ensure that there is no shortage of the cereal and that the price rise is curbed, he said.

The trade has already contracted about 5 lakh tonnes (four lakh tonnes from Australia and one lakh tonnes from France) for imports in the months ahead, said MK Dattaraj, Managing Director of the Bengaluru-based Krishna Flour Mills.

“The indigenous high protein wheat is in short supply and we are forced to import Australian premium wheat,” he said, adding that the next domestic harvest was ten months away, in April 2017.

Domestic prices have risen by up to Rs. 300 per quintal depending on the quality of wheat and the markets over the past two months and continue to trade firm. Wheat futures on the NCDEX are trading firm.

“If the prices go up further, we have to look at imports. In fact, we have contracted a small quantity in anticipation that the government will remove the import duty,” said Pramod Kumar of Sunil AgroFoods.

India had imported about seven lakh tonnes of wheat and this year cereal imports could exceed two million tonnes.

Source : Business Line