India, Brazil imports buoy wheat trade

Huge wheat imports by India and Brazil are likely to push up global trade of wheat by about 700,000 tonne to a total of 111 million tonne in 2006-07.

But, export supplies are projected to be constrained owing to a fall in production in some key exporting nations such as Australia and Argentina.

As a result, international wheat prices are likely to remain firm on sustained uptrend.

However, imports by several leading traditional wheat importing countries are anticipated to decline thanks to better domestic harvests.

These projections have been made by the UN Food and Agriculture Organisation (FAO) in its latest report on the global crop prospects and food situation.

It points out that the prices of good quality wheat have already hardened by some 24 per cent compared to their levels a year ago.

In the futures market, the prices of soft red winter wheat, which is usually traded at relatively lower prices, for delivery in December at the Chicago Board of Trade (CBOT), the leading wheat futures exchange, averaged $147 a tonne in September, up $29 a tonne from the corresponding period last year.

"Wheat prices have also benefited from spillover gains in maize and soybeans futures as well as large speculative acquisitions by hedge funds," the report maintains.

The downtrend in international wheat prices in early August turned out to be short-lived and prices resumed their upward movement. This was attributed to factors such as stronger pace in export sales, tighter supplies from the Black Sea, a further reduction in the European Union's cereal output estimates and unfavourable crop prospects in Australia and Argentina.

By September, US hard wheat export prices went up to average around $208 a tonne, up by about $40 a tonne, or 24 per cent, from the same period last year.

On the demand side, figures of several key wheat importing countries are forecast to remain either unchanged at the last year's level or decline in 2006-07, reflecting a generally favourable domestic supply situation. But in some other cases, the wheat purchases are likely to rise sharply.

The report notes that India is in the market for the import of at least 6 million tonnes of wheat, the 30-year high figure, because of the shortfall in the government held stocks and rising domestic prices.

The State Trading Corporation and other public agencies have already bought about 5.5 million tonne from abroad. Besides, the government has removed all import duties until the end of this year to facilitate imports by private traders.

Brazil is also projected to import about 2 million tonne more wheat than last year owing to prospects of much lower domestic wheat harvest. Its total imports might touch 7.5 million tonnes in 2006-07, the highest in 6 years.