India may pay more for wheat as freight costs rise, traders say

India may pay more for wheat as freight costs rise, traders say
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First Published: Fri, May 18 2007. 02 21 PM IST
Updated: Fri, May 18 2007. 02 21 PM IST
Thomas Kutty Abraham and Pratik Parija, Bloomberg
Mumbai: India, the world’s second-biggest wheat consumer, may have to pay at least a third more than it did last year to buy the grain because of higher freight costs and an increase in global prices of the commodity.
The government may receive offers at between $264 (Rs10,788) a metric ton and $281 a ton to import 1 million tons of wheat in a tender that closes on 21 May, according to a median forecast of eight traders and analysts surveyed by Bloomberg. That compares with an average $205.31 a ton buyers paid last year.
India is buying wheat for a second year to boost reserves as demand exceeds production. The purchases come at a time when freight rates have climbed to more than a two-year high as China and India, the world’s two most-populous nations, buy more grain and iron ore. Wheat prices have advanced 16% in the past year as bad weather damaged crops from U.S. to Australia.
“The freight market is on the boil,” said Atul Chaturvedi, president at Adani Enterprises Ltd, which trades agricultural commodities, chemicals and metals. “Freight is going to make wheat expensive for India.”
The Baltic Dry Index, an overall measure of commodity- shipping costs, has risen 48% this year.
Cargill Inc., the largest U.S. agricultural company, AWB Ltd and Glencore AG may offer to sell wheat at prices ranging from $260 a ton to $300 a ton depending on the port of delivery and the origin of the wheat, the survey showed. They were among the companies that won bids last year to sell 6.5 million tons, the first time India imported the grain in six years.
‘Difficult Situation’
India’s wheat imports may total 5 million tons this year, farm minister Sharad Pawar said 12 May. Output may exceed 73.7 million tons. That may not be enough to cover demand forecast to reach 75.5 million tons as rising incomes spur consumption of breakfast cereals and biscuits.
“Consumption is growing even in traditionally non-wheat eating regions like the South and Northeast and that’s created a mismatch,” said Rahaman K.N., an analyst at IL&FS Investsmart Commodities Ltd in Mumbai. “India is in a difficult situation again this year. The government may continue to import to keep prices under check.”
Wheat futures for July delivery rose 0.7% to $4.885 a bushel in after hours trading on the Chicago Board of Trade.
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First Published: Fri, May 18 2007. 02 21 PM IST