Wheat seen firmer on supply crunch

Wheat prices may remain high as market scenario is rife with speculation over supply shortage. Traders termed demand 'just matching' the supply.

"Traders are not selling wheat now. They hope to sell it in high demand months, August and September, to get better price," said a Punjab agriculture ministry official.

"Following these months will be the festival season and prices are likely to remain on the higher side," he added.

Traders have alleged that multinationals, flour millers and stockists were hoarding.

However, MNCs and flour millers have denied this saying stockists were not willing to sell at the moment. Prices were volatile last week following speculations of the government facing difficulty on lower wheat buffer stock that would curtail wheat supply to flood-hit regions in Maharashtra and Orissa.

Currently, the government procurement is at a low of 147.87 lakh tonne compared with 167.93 lakh tonne last year. Earlier, Agriculture Minister Sharad Pawar had stated that though buffer stock was lower this year, it was enough for the government welfare schemes.

The market was also rife with rumours of increased supply by Punjab Agro. Market expected Punjab Agro to sell off around 1 lakh tonne of its last year's stock. The official, however, ruled out that the company had any carry over stock and thus, denied the likelihood.

Few traders feel that prices are likely to rise further following the delayed monsoon. "According to the market buzz, delayed monsoon has not allowed soil moisture to reach optimum levels and this will affect the next rabi sowing of the crop," said an analyst K N Rahaman.

Agriculture experts, however, refute this. "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," Dr B B Singh, head-genetics, Indian Agricultural Research Institute.

While the government claims that the shortfall in 2005 crop was not significant at 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.

Another reason that may keep the prices high is that the rabi crop may not get the required di-ammonia phosphate (DAP) supply, the official said.

He agreed, however, that there was still a month's time to ensure adequate supply. States will need DAP for their rabi crop sowing around October 20 onwards.

On Wednesday, the NCDEX August futures ended at Rs 769.40 per 100 kg, September closed at Rs 786.40, October closed at Rs 804.80 and November was at Rs 820.20.

Points of discord

Traders have alleged that multinationals, flour millers and stockists were hoarding

However, MNCs and flour millers have denied this saying stockists were not willing to sell at the moment

Traders are said to be not selling wheat now as they hope to sell it at higher prices in the high demand months of August and September