Import move to hit wheat futures

The government's move to import wheat stocks after a seven-year hiatus is expected dampen market sentiment and pull down prices.

The government has asked its trading agency, STC Ltd, to import 5 lakh tonne of wheat at zero duty to fend off any price rise driven by speculation in the next 2-3 months.

Market players expect prices to fall and the Ncdex February futures to touch Rs 800-820 per 100 kg in the next 7-10 days. Overall, however, imports may depress the market for the next six months, said a Mumbai-based analyst.

Spot wheat on the National Commodities & Derivatives Exchange Ltd. (Ncdex) closed higher at Rs 931.85 per quintal against Rs 918.40 per quintal Wednesday.

February and March contract closed rangebound at Rs 847 per quintal and Rs 799 per quintal, while April and May contract closed at Rs 733.40 per quintal and Rs 749 per quintal, respectively.

At present, India levies a 70 per cent duty on wheat imports, making it an unviable proposition. The last time India imported wheat was in 1998-99 - about 15 lakh tonne.

The new consignments are expected to arrive in about 60 days, around the time the domestic harvest of wheat will also begin.

"STC will take a decision on the origin country and imports will be made only at four southern ports, that is, Chennai, Kakinada, Tuticorin and Vishakapatnam," the minister told a press conference, adding that government will not allow imports to any other ports.

The recent additional release of wheat by the Food Corporation of India under OMSS scheme has helped pull down prices across the country, except in Karnataka and Kerala where prices are about Rs 1,100-1,200 per 100 kg.

Spot price of wheat had touched a high of Rs 1,055 per 100 kilograms, ex-Delhi in the first fortnight of January but have declined snce following additional release FCI release.

On Thursday, spot wheat price was Rs 920-940 per 100 kg, ex-Delhi. Interestingly, traders were even seen asking for a buying price of Rs 820 per 100 kg.

"This is why we feel there is a need to import wheat there only. We feel the reason for this to be a rise in demand for wheat following a changing trend in food habits. Also, transportation costs from north to south is quite high and, thus, imports can be a good option," the minister said.

As of on Thursday, the official buffer stock is about 47 lakh tonne. The monthly requirement across the country is estimated at 13 lakh tonne.

"However, we do not wish to take any risk and allow any speculative price rise in the next two-three months. This led us to import wheat now," said Pawar.

He added that he will review the market situation again in the month of May and any decision for an additional import of wheat may be taken thereafter.

As per official estimates, the current rabi wheat crop, to be harvested late March onwards, is expected to be about 740-750 lakh tonne compared with 720 lakh tonne last crop year.

The government is expecting 2006-07 wheat procurement to be about 160 lakh tonne compared with 147.8 lakh tonne in 2005-06 and 168 lakh tonne in 2004-05.