Wheat futures dip despite jump in spot prices

Crop sowing has increased by 13% according to recent govt data

Despite a marginal gain in spot wheat prices today, the Ncdex futures fell for the third consecutive day. Players attribute it to the Ncdex December contract delivery premiums and discounts at other delivery centres such as Khanna (Punjab) and Kota (Rajasthan), which are seen at the higher end.

"In case of delivery ex-Khanna (in Punjab), prices are at a premium of Rs 41 per 100 kg," said a Mumbai-based analyst. Selling pressure was accentuated with government acreage estimates showing healthy sowing figures for wheat.

According to official data, as on November 20, wheat sowing was 51.23 lakh hectares compared with 45.32 lakh hectares, a rise of 13 per cent. The rise was largely in Madhya Pradesh (almost double), Rajasthan, Himachal Pradesh, and Uttaranchal despite a slight decline in Punjab. Official sources suggest that sowing in Punjab would also rise in times to come.

Ncdex December wheat contract ended at Rs 844 per 100 kg, down Rs 2 from previous close and saw an open interest of 88,510 tonne. January contract ended up Rs 0.60 to Rs 857.80 per 100 kg and saw an open interest of 58,720 tonne.

Delhi spot market rose Rs 5 per 100 kg today to Rs 875 on tight supply and with daily supply down to 6,500 bags of 50 kg each. On Wednesday, however, prices softened following increased supplies at 10,000 bags against 4,000 bags daily. Market players, however, feel that prices would rally given the present tight supply.

"The rally would continue if the government does not do something to ease the situation, like allowing imports or getting supplies in between states," said R Jain, co-proprietor of Delhi-based flour mill Rajdhani Atta.

"A rise of another Rs 15-20 per 100 kg cannot be ruled out," said Jain.

With wheat demand seen "just matching" supply, as a trader termed it, the market scenario was likely to remain rife with speculation over supply shortage, thus keeping prices high.

While government estimates of a shortfall in 2005 crop is not significant at 720 lakh tonne (compared with 721.1 lakh tonne last year), market players peg the recently harvested crop at around 690-700 lakh tonne.