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India scrambles to buy wheat; eyes Canada, EU

India scrambles to buy wheat; eyes Canada, EU
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First Published: Mon, Jul 02 2007. 02 16 PM IST
Updated: Mon, Jul 02 2007. 02 16 PM IST
Hari Ramachandran/Reuters
New Delhi: Stymied in the big US grain market, India will be scouring Canada and Europe for wheat cargoes despite surging world prices, as New Delhi scrambles to replenish stocks.
In May, India sought to buy 1 million tonnes of wheat but backed away from making deals as it complained of high prices. And despite prices soaring to 11-year highs, India a few days ago returned to the market with a tender for 1 million tonnes.
But the pressure is on.
“First let us fill the bins. Then we can talk about prices,” said Avinash Raheja, an analyst with Commtrendz Risk Management. “The market for wheat is drying up and our options are limited. Maybe they can tap the European markets this time.”
A government official involved in the tender negotiations said: “Wheat is now available in Europe, in countries like France, and also Canada. If we don’t enter the market now, then maybe later we won’t get any wheat at all.”
For India, the options are limited. Australia’s crop won’t be available until November and US wheat suppliers are unlikely to meet New Delhi’s tender specifications.
Last year, the US did not sell any wheat to India due to frustrations over the bidding process. New Delhi imposed a number of conditions on how cargoes would be fumigated, inspected, and sampled.
“The US market is out because of phyto-sanitary norms. Australia is a bit of a question mark this year, although they are expecting a better crop than last year,” Raheja said.
Farm Minister Sharad Pawar has said India would need to import 5 million tonnes of the grain between August and December, but traders expect India to import less because of big purchases from its own farmers.
Bids at higher prices
Some analysts expect the government to buy at least 2 million tonnes of wheat before December.
Traders expect India to receive bids for the latest tender at around $320 a tonne, including cost and freight, about 20% higher than prices of around $263 it received for its May tender, which New Delhi cancelled, saying that prices were too high.
And this time, India will probably be forced to buy. Analysts expect little respite in global prices in the near term, with world stocks seen falling to their lowest in 30 years, erratic weather disrupting the US harvest, and drought in Ukraine and Russia.
“Weather is the wild card and if it turns out to be bad in Australia, prices will sky-rocket,” said Rajni Panicker, an analyst with Man Financial. In April, the government had wheat stocks of about 4.5 million tonnes. State-run agencies have so far bought close to 11.5 million tonnes of wheat from farmers.
To meet the country’s need for subsidized sales and welfare schemes, the government needs 13 million tonnes of the grain. After meeting that requirement, the government will be left with close to 3 million tonnes of wheat by next April.
But New Delhi is keen to maintain stocks of about 4.5 million tonnes, Panicker said.
“I think the government will buy two million tonnes in all. They could invite another tender for 1 million tonnes for supplies between November and January,” said K.N. Rahman, an analyst with IL&FS Investment Mart.
India annually produces about 70 million tonnes of wheat and most of it is consumed by its a billion-plus population.
Wheat in the southern states, the region which does not grows wheat, was quoted at around Rs11,700 a tonne, or $286, nearly Rs1,000 higher than last year.
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First Published: Mon, Jul 02 2007. 02 16 PM IST