Centre cites US stance for buying costly wheat

The Centre came out with an explanation for wheat import at high prices, indicating that its decision was guided by the downgrading of the global wheat output by the US Department of Agriculture (USDA), which had led to sharp rise in wheat prices across the world.

At the same time, it pointed out that the State Trading Corporation's earlier tenders issued in May were rejected in expectation of getting lower prices after the fresh crop harvest in major wheat producing countries in July-August and November-December.

A statement issued by the food ministry today said the futures prices of wheat at the US-based Chicago Board of Trade (CBOT) for September, December and March next had shown a bullish trend pointing towards higher prices in the international market in the months to come.

Despite this, the government said it would ask the State Trading Corporation (STC) to float tenders for purchase of more wheat from the international market in the coming months, after taking into account the requirement, availability and price trends.

The official statement was in response to criticism of the government for rejecting the wheat import tenders in May, which had attracted bids at $263 a tonne, and ordering import of 511,000 tonnes of wheat through July tenders at above $317 a tonne.

The statement, however, did not clarify why it had been guided by the USDA assessment of global wheat output alone and not by that of other world organisations, including the UN Food and Agriculture Organisation (FAO) and the International Grain Council (IGC), which had projected a larger wheat harvest for the current year.

But it did mention that the STC, while recommending purchase of over 300,000 tonnes of wheat at $263 per tonne through May tenders, had indicated that the IGC report had described the Australian crop to be harvested in November-December as good and that it might have a softening effect on the wheat prices.

The statement concedes that the ministry's finance division had also cautioned against buying wheat from abroad at prices higher than the domestic prices. Such a move would lead to discontentment amongst the domestic farmers in view of higher prices for purchasing imported wheat, the finance division had said.

The ministry's statement turns down the suggestion coming from several quarters to purchase wheat for the public distribution system (PDS) from the local market, instead of resorting to imports.

It maintains that such purchases would have led to shortage in the open market, thereby increasing wheat prices in the domestic market.

However, the statement does not allude to bullish trend witnessed in the domestic market as a consequence of the decision to import wheat at higher prices.

The official statement points out that the government had taken the decision to import five million tonnes of wheat in the current year in last March.

But it did not explain what had prompted it to do so as there was no indication till that time of likely production or procurement of wheat from the standing crop.

The statement also does not explain why it opted to buy only 5,11,000 tonnes of wheat and not the entire offered quantity of nearly 9,00,000 tonnes if it was convinced that the international prices are bound to rise further in the months to come.

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