Cargill, two others to supply 511,000 tonnes of wheat

Cargill, Toepfer International and Riaz Trading have won the contract to sell wheat to India at record prices, a month after the world's second-biggest consumer of the grain refused to pay a lower rate.

India accepted 511,000 tonnes, less than the 920,000 tonnes offered by suppliers, at $317 a tonne and $330 a tonne, said a government official in New Delhi today. The price is higher than the $265 a tonne offered in a tender cancelled on May 30.

The government had scrapped a 1 million tonne contract, citing high prices quoted by suppliers including Archer Daniels Midland and Cargill. Wheat prices have since climbed 16 per cent to a record on the Chicago Board of Trade, making it expensive for India to boost its reserves.

"The government really has no choice but to buy at these high prices,'' said Kishore Narne, head of research at Mumbai-based Anand Rathi Commodities. "Farmers will use these prices as a benchmark when they sell to the government next year.''

The federal government, the biggest buyer of food grains in the country, purchases rice, wheat and lentils at assured prices from farmers to supply to fair-price shops. Wheat-growers were paid Rs 850 ($21) per 100 kilograms this season, less than the prevailing market price of more than Rs 1,000.

India had 13.3 million tonnes of wheat in state warehouses as of May 31, less than the 17.1 million tonnes the government needed to store by July 1. Imports may rise to 5 million tonnes this year to cope with emergencies, Agriculture Minister Sharad Pawar has said.

Production may exceed 73.7 million tonnes this year, the ministry has said. This may not be enough to cover demand, which a Bloomberg survey in April forecast would reach 75.5 million tonnes, as rising incomes stoke consumption of wheat products.

Wheat futures rose in Chicago, with the September contract up 0.6 per cent to $6.03 a bushel in after-hours trading. Prices are up 57 per cent in the past year, reaching a record $6.50 on June 29, on expectations for a smaller US crop.

Louis Dreyfus and Concordia Trading were among the seven suppliers who bid for the tender that closed on July 4.

The grain is set for delivery between August and November, according to the tender document.

NewsWire18 adds: According to a senior government official, the government has approved STC's proposal of wheat buy from AC Toepfer, Cargill and Riaz Trading, as these were the only companies offering wheat below $330 a tonne.

State Trading Corp had received bids ranging between $317 and $372 a tonne in the tender that closed on July 4.

The government had asked the trading agency to shortlist bidders offering wheat below $330 a tonne.

Toepfer was the lowest bidder in the tender, offering 128,000 tonne wheat at $317 a tonne at Mundra Port, and the balance 128,000 tonnes at around $328 a tonne at other ports.

Riaz Trading has offered to sell 125,000 tonnes wheat at $329.95 a tonnes while Cargill has offered 130,000 tonnes for $324-327.

State Trading had last week asked companies to lower their rates, but none of them have agreed.

The government is keen on importing 5 million tonnes wheat this year as it wants to build a large wheat reserve to help keep prices of the food grain under control ahead of the 2009 general elections.

The government has about 15.8 tonnes wheat in its kitty for the year, taking into account last year's carry-over of 4.7 million tonnes and 11.1 million tonnes procured so far. The amount is enough to cover its requirement of 16 million tonnes till March, including 12 million tonnes for state-run welfare schemes, and a carry-over of 4 million tonnes.

An official said the government plans to import more wheat than what is currently required as it seeks to build a wheat buffer of at least 6.5 million tonnes by April 1.