Wheat prices spiral up amid hoarding charges

Wheat prices have risen Rs 773 per quintal from about Rs 700 a month ago amid allegations of hoarding by multinationals, flour millers and stockists.

Reflecting the market development, the futures contracts for September are quoting at Rs 813, October Rs 828 and November Rs 842.

Mandis are looking increasing bereft of wheat stocks, in spite of a decline in government's procurement to 147.87 lakh tonne from 167.93 lakh tonne last year.

Interestingly, the procurement is low even as the government's minimum support price of Rs 640 a quintal is much lower than the market price. Further, with buyers willing to pick from farmgate, few farmers brought their produce to mandis this year.

MNCs and flour millers have, however, countered the allegations of hoarding by stating that stockists were not willing to sell at the moment on hopes of getting a higher price down a month or two.

The developments have resulted in rampant speculation in the derivatives market. "Futures are too overvalued at the moment with September contract hovering around Rs 815 a quintal. The rally has happened too early in the season and at current levels, prices are at an all-time high. While the market scenario of wheat is sufficient today, it may not be so in times to come when the supply situation becomes tight," said Rajini Panicker, head-commodities with Mumbai-based Refco Commodities.

While the government estimates the shortfall in 2005 crop at a not-too-significant 720.0 lakh tonne compared with 721.1 lakh tonne last year, market players peg the recently harvested crop at around 690-700 lakh tonne. Even a senior scientist at the Indian Agricultural Research Institute pegged the crop at "700 lakh tonne plus".

Market players attributed the lower output and poor yield to inclement weather""higher temperature during the sowing November-December period and untimely rains in February-March. Also Punjab's wheat crop was hit owing to the brown rust fungus.

"Multinationals Cargill India, ITC Agribusiness (India) and Glencore India along with stockists are hoarding huge stocks," a dealer said.

"Over 20 lakh tonne is at least with Cargill and ITC so the overall stock figure with MNCs will be much higher," he added.

Cargill, however, refuted the charge. "Our total grain purchases were not over 1 lakh tonne as prices were high. We buy on behalf of flour millers but this year as the output is less, much purchase was not possible," country manager Hardeep Singh said, adding the company is currently holding stock of about 20,000 tonne.

P Gupta, senior vice-president, Roller Millers' Federation, said, "Traders and millers seeing high prices on the futures are unwilling to sell at a lower price."

Some flour millers, strongly feel that more than hoarding of stocks, it is speculation that is killing the market. Satinder Jain, proprietor of Rajdhani Atta said, "It is plain speculation of the bourses which is not only hurting the real trader but also the common man."

Agriculture Minister Sharad Pawar's remark that India would not require any wheat imports this year to meet its requirement is being considered as a bullish sign and is likely to keep prices firm, an analyst said.

Some others feel that prices are likely to rise further following the delayed south-west monsoon. "According to market talk, delayed monsoon has not allowed soil moisture to reach optimum levels and this will affect the next rabi sowing of the crop," said analyst K N Rahaman.

Agriculture experts, however, refute such a supposition. "It is too early to predict such an impact about the rabi wheat crop. Further, good rains in the gangetic regions will help increase fertility and improve water reserves and irrigation facilities," B B Singh, head-genetics, Indian Agricultural Research Institute.