February 22, 2012

 

Indian wheat futures may drop on good weather

 

 

The wheat futures of India may further lower up to a second straight week on favourable weather in key growing areas.

 

This also brightened the prospects of a record harvest for a second year running, and an expected rise in arrivals in spot markets from the new season crop, traders said.

 

India's wheat output in 2011/12 will cross the current official forecast of a record 88.31 million tonnes due to favourable weather conditions, Farm Minister Sharad Pawar said on Friday (Feb 17).

 

India, the world's second-biggest wheat producer, harvested a record 86.87 million tonnes of the grain in 2011.

 

The bumper harvest and ample stocks from the previous year are likely to put pressure on prices, said Manjit Gill, a trader based in Khanna, Punjab, a major grower of wheat.

 

"Lower temperature in Uttar Pradesh, Punjab and Haryana is very good for the wheat crop as it increases yields. Prices in major markets have started falling and it could also impact the futures market," Gill said.

 

Uttar Pradesh, Punjab and Haryana are the three top growers of the commodity and the states together account for more than half of the total wheat produced in India.

 

Wheat arrivals from western Gujarat and the central Madhya Pradesh states are likely to reach the markets next week.

 

India's January 1 wheat stocks at government warehouses were 25.7 million tonnes, more than three times the official target for the quarter ending March 31, government sources said last month.

 

At 12:29 p.m., the March wheat contract on the National Commodity and Derivatives Exchange (NCDEX) was trading flat at INR1,228 (US$24.97) per 100 kg.

 

India has raised the price it will pay to buy grain planted from October to INR1,285 (US$26.13) per 100 kg (about US$258 per tonne) from INR1,170 (about US$235 per tonne) paid in 2011, a raise of 10% from the year earlier.