March 3, 2009

India's northern Punjab state, the second largest wheat producer, aims to increase purchases from farmers by 10 percent this year as offered prices outstrip market rates, government officials said Monday (Mar 2).

Good production once the harvest starts in March and higher wheat purchases will put further pressure on benchmark prices in Chicago, analysts said.

India's government will pay Rs1,080 (US$20.8) per 100kg for 2009's crop, up from Rs1,000 (US$19.3) a year ago, spurring hopes Punjab can buy 11.5 million tonnes.

Traders said wheat prices in the main physical markets of north India are lower than the government's purchase price, leaving farmers with little choice but to sell the grain to the government.

Punjab is expected to produce 15.53 million tonnes of wheat this harvest, slightly lower from last year's 15.72 million tonnes, state government officials said.

Punjab contributed the most to the stocks of the Food Corporation of India, the main grain purchasing agency, which bought a record 22.68 million tonnes of wheat in 2008.

India is expected to harvest 77.78 million tonnes of wheat this year, down from 78.57 million tonnes in the previous year, the agriculture ministry said.