Wheat spot-futures gap to last 1 month, say experts

The mismatch between spot and futures markets of wheat "" with the former trading over Rs 100 per 100 kg higher than the latter "" is expected to continue for another month, industry experts said. This has been the trend for the last one month.

Despite the fact that fresh demand and the current tight demand-supply scenario are keeping the spot prices high, wheat futures continue its downward trajectory following the premiums that delivery centres (for the futures like Khanna, Karnal and Kota) hold.

For instance, in case of ex-Khanna (in Punjab) delivery, prices are at a premium of Rs 43 per 100 kg than the market rates.

Most players were unable to make out the market pulse. Some players took Ncdex December wheat delivery at a high rate of over Rs 970 per 100 kg, following the premiums, when the spot market price was about Rs 890-900 per 100 kg.

Ncdex January wheat contract was settled today at Rs 807.80 per 100 kg, down from the previous close at Rs 809.20. Open interest today touched 1,09,990 tonne from the previous close at 1,02,940 tonne.

A section of Delhi traders is worried that Food Corporation of India is selling wheat in Haryana and not in Delhi.

"FCI sold about 1 lakh bags of wheat in the last one week in Haryana. FCI's wheat price in Haryana at Rs 825 per 100 kg is lower than its price in Delhi at Rs 840 (per 100 kg). But it is still not selling in Delhi and pushing the prices up," said Rakesh Jain, a Delhi-based trader.

Today, the spot market price (ex-Delhi) was at Rs 915 per 100 kg, up Rs 2 from the previous close. Market players expect the spot prices to trade between Rs 900 and Rs 930 (per 100 kg) for the next two months and see their peak in early March.

The spot prices are likely to continue their upward journey with the supplies shrinking and the government stock being low, said an analyst with Sharekhan Commodities.

"Wheat prices usually peak in the first half of March with the new crop harvest likely to begin by the last week of the month or early April, and slide down as the new crop comes to the market. As the peak comes, all hold on to stocks "" be it traders, stockists, flour millers or even farmers - and try to push it all into the market before the new crop comes in," said an industry expert.

Wheat acreage, according to the latest available (December 19) official data, was at 207.09 lakh tonne compared with 192.11 lakh tonne last year, with Uttar Pradesh and Rajasthan leading the rise. Market players, however, are not too optimistic about this rise in acreage - they would rather wait and watch till the crop is out in the market.

"Looking at the last five years, it will be only in March that a clear indication about the rabi wheat crop is expected to emerge. Currently, acreage is good and weather ideal. Weather conditions in the next three months will be crucial in determining the yield of the crop," an analyst said.

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

COARSE-GRAINED

Despite the fact that fresh demand and the current tight demand-supply scenario are keeping the spot prices high, wheat futures continue its downward trajectory following the premiums that delivery centres hold

The spot prices are likely to continue their upward journey with the supplies shrinking and the government stock being low

Some players took Ncdex December delivery at a high rate of over Rs 970 per 100 kg, when the spot market price was about Rs 890-900 per 100 kg