Singapore / New Delhi: Indian importers have bought small volumes of Australian wheat in recent weeks, the first such purchases in two years, but bulk purchases are unlikely as stockpiles amount to nearly three times reserve targets.

The imports of wheat in containers this month, which took the market by surprise, were triggered by firming local prices, which have jumped 19% this year, and global supplies that are around 15% cheaper for mills in southern India.

But soon after the deals, New Delhi made clear that it saw no pressing need to import large quantities -- at least until a clearer picture about the new crop emerged.

“I am absolutely not gung-ho on India importing wheat," said Atul Chaturvedi, head of the agricultural arm of Adani Enterprises Ltd, a leading Indian commodities trading firm. “The government is sitting on a massive stockpile of wheat."

Three good harvests and export curbs have helped government agencies accumulate wheat stocks of 28.2 million tonnes by 1 October, against a target of 11 million tonnes.

Still, the government, which sets the price of grains it pays to farmers, has further pushed up the cost of Indian wheat with an increase of nearly 2% in the support price, to Rs11,000 a tonne, for the crop to be gathered in April.

This encouraged millers in southern India to import wheat in containers from Australia at around $300 a tonne, including cost and freight, compared with the domestic price of about $350.

Mills in southern India find it cheaper to import from Australia, compared with moving the grain from northern growing regions, which would include a huge transportation cost.

Industry officials said the price difference, which will persist for some time, will prompt millers to keep importing smaller wheat parcels and the government was unlikely to block them, especially after the worst monsoon in 37 years decimated the rice crop and stirred doubts about winter-sown wheat.

But any signs of bulk purchases may prompt New Delhi to slap on an import tariff, which was dropped two years ago, to avert a problem of plenty.

“The government is allowing small-scale imports, which is fine," said one Singapore trader with a multinational commodities firm. “But large imports will hurt the government’s own interest, as it is trying to raise prices for farmers to boost output."

Recent rains in India’s wheat-growing northern states, mainly Uttar Pradesh, Punjab and Haryana, have boosted the outlook for the crop, even though high temperatures have shrunk the overall crop area, farm and weather officials said.

Vulnerable to rain, fog or heat

International wheat prices have slid 9% this year as the world grapples with a second straight year of oversupply, but recent imports by countries such as India have caught investor attention as money flows into commodity markets.

Analysts said any rise in Indian purchases would lend a bullish tone to the wheat market, particularly if output fell in India and other regions, such as north Africa.

“Earlier, it looked like a temporary situation, but now it seems wheat imports will continue for some time, because prices are attractive for Indian buyers," said a trader based in Singapore who sells US and Australian wheat in Asia.

“I have done a few deals at around $290-$300 a tonne and there seems to be more interest."

Another trader said five containers of wheat had been cleared by Indian customs authorities two weeks ago, signalling tacit government support for imports that will soothe fears of possible grain shortages in the country of over one billion people.

Alhough the government expects the wheat harvest to surpass last year’s record of 80.6 million tonnes, just a few spells of unseasonal rain, winter fog, or a temperature spike in February will be enough, analysts say, to reverse the equation for the crop, which is sensitive to weather anomalies.

This year, India’s driest June in 83 years delayed rice planting, the harvest of the grain, and the subsequent wheat sowing. Farm scientists say this could take a toll of the wheat crop, but it is still too early to assess its size.

Jag Shoran, principal scientist at a state-run wheat research agency, said wheat sowing was normally completed by mid-November in the northern states of Punjab and Haryana, the country’s bread basket, but had been delayed by eight to 10 days this year.

“Although there will not be any apparent damage to the crop due to the 8-10 days’ delay, any further delay may harm the crop."

The wheat crop will also suffer fallout from a dispute between farmers and sugar mills over cane prices that delayed the cane harvest, and now threatens to affect wheat sowing on some 2 million hectares in eastern Bihar and northern Uttar Pradesh.

These two states are important as government agencies, which often buy more than 90 percent of the grain at higher prices from farmers in Punjab and Haryana, are less active there, allowing millers and private traders to secure wheat more cheaply.

A shortfall in these regions would force private traders to turn overseas for wheat.

K.L. Rahman, research head at Way2Wealth, a domestic brokerage, said farmers would eventually harvest cane and plant wheat, but the delay in planting may hit productivity.

“One thing is sure, Indian wheat prices will rise by 5 to 15% from the current level in the near future due to reports of delay in crushing," Rahman said.