Govt 'mistimes' wheat imports

The government has chosen to enter the global wheat market to import 350,000 tonnes of wheat at a time when the UN Food and Agriculture Organisation (FAO) has reported export supplies to be "exceptionally tight" and prices ruling 50 to 65 per cent above last year.

World wheat stocks have also dipped to their lowest level in 25 years.

Public sector canalising agency MMTC floated a fresh tender on November 12 to import 350,000 tonnes of wheat for delivery by February 10.

This move has coincided with the release of the FAO's latest global Food Outlook report, which has put likely world wheat production in 2007-08 at 602 million tonnes, just around 1 per cent higher than the previous year's harvest, which was among the lowest in several years.

Significantly, the FAO has also pointed out that the situation is likely to improve in the next season, resulting in a drop in wheat prices by around mid-2008. By then, India will have also harvested a bigger wheat crop owing to a record 18 per cent hike in wheat support prices.

Indian wheat inventories are also projected to increase following anticipated higher output from the next crop, the global body has indicated as another pointer to the mistiming of this fresh import tender.

Food Corporation of India (FCI) sources put wheat stocks in the central grain pool at about 10.12 million tonnes on October 1. After accounting for the normal wheat offtake till March-end, year-end inventory would be between 3.5 and 4.5 million tonnes.

This is close to the buffer stocking norm of 4 million tonnes for April 1. Year-end stock estimates do not account for the latest import tender.

But there are strong indications in the futures market of a significant fall in global wheat prices in the next few months.

"Favourable growing conditions in Argentina and generally higher winter plantings are likely to improve the supply situation in the coming months and result in lower prices by the middle of next year," the report said.

Wheat futures on the Chicago Board of Trade (CBOT), which serve as the benchmark for the international wheat market, are quoted at around $248 a tonne for July delivery, against $ 350 for December delivery.

FAO attributes the current tight world wheat scenario is attributed to repeated downward revisions of production forecasts in a number of major exporting countries, most notably Australia.

The relatively insignificant increase in production, coupled with already very low carryover stocks (the lowest since 1982) has resulted in an extremely tight global market, the world grain body has said.

As a result, the global wheat trade, too, is anticipated to drop in 2007-08 by 5.4 per cent to 107.5 million tonnes from 113.6 million tonnes the previous year. Most wheat exporters are likely to register sharp decreases in shipments.

The US will be the only exception as its wheat exports are likely to rise by about 7 million tonnes thanks to a strong rebound in domestic wheat production and the falling US dollar which has made supplies from this country particularly competitive.

India, however, does not import wheat from the US on grounds of stock quality.