High global wheat prices could deter India from picking up the entire one million tonnes (mt) of the grain that it had sought in a recent tender, despite having received bids in excess of that amount, traders said on Tuesday.
Though expensive, some contracts were likely to be signed to draw out stocksbeing hoarded by domestic farmers and brokers in the hope of getting better returns later in the year.
“I doubt whether they will buy the entire quantity,” said a Mumbai-based trader at a global trading firm. “If they go a bit slow, then the feeling would be that India is not desperate for wheat. That would help to cool global prices.”
A New Delhi-based trader agreed. “They may buy some of the quantity and leave the rest for buying through another tender,” he said.
State-run agencies have so far procured close to 10mt from farmers at prices fixed in advance by the government. They had hoped to snap up 15mt. The wheat buying season tapers off from mid-May.
An analyst at a Mumbai-based brokerage said that he expected the government to buy 11-12mt by season-end.
On Monday, the State Trading Corp. said that it had received seven bids against its latest tender in the price range of $265 (Rs10,865) to $302 per tonne, sharply higher than the weighted average of $205.31 that it had paid for imports of 5.5mt last year. In its last tender of 2006, India paid about $230 per tonne.
Global supplies are likely to improve in the coming months, bringing down international prices.
A government official, closely involved with the tendering process, said Monday’s response was “good” and there was stiff competition. Seven firms bid, including Glencore, US-based Cargill and Germany’s Toepfer.
Some of the wheat offered was from Canada, Russia and Ukraine, but Australia—one of India’s largest suppliers last year—did not participate. Neither did US or Pakistan; the latter currently has some of the cheapest wheat available.
Traders expect that India will need to import 3-5mt of wheat this year, and said that slow procurement from farmers may point to a harvest lower than the forecast 73.3mt.
In 2006, output stood at just more than 69mt. A Food Corporation of India official said market arrivals had so far been similar to last year’s at 13.6mt.
India needs 12mt of wheat annually to run its public distribution system and welfare schemes for the poor.
“We are nowhere near the bumper crop that everybody was talking about. The hype that was put out during the planting season seems to have fizzled out,” Avinash Raheja senior vice president of Commtrendz Risk Management, said.
(Mayank Bhardwaj contributed to this story.)