April 3, 2012

India's wheat futures likely up this week due to late arrivals

Though projected higher output in the current season could limit the gains, Indian wheat futures are likely to rise marginally this week on delay in arrivals in key growing areas, analysts said.

"In northern states such as Punjab, Haryana, and Uttar Pradesh, temperature was unusually low in March and it could delay wheat harvesting by up to two weeks. This has provided some support to prices," said Chowda Reddy, senior analyst with JRG Wealth Management.

India's wheat output could touch a record 90 million tonnes in 2012 on favourable weather conditions, Farm Secretary P.K. Basu said last week.

On Monday, the key April wheat contract on the National Commodity and Derivatives Exchange was trading up 1.05% at INR1,253 (US$24.76) per 100 kilogrammes at 3:57 p.m.

Prices are trading in the range of INR1,230-1,260 (US$24.31-24.9) per 100 kilogrammes for last two weeks and are likely to remain in this range for some more time, analysts said.

Last year, the government said it would pay 10% more to farmers for wheat in 2012 and raised the MSP to INR1,285 (US$25.4) per 100 kilogrammes. The government usually buys wheat from farmers for its welfare schemes through its agencies at pre-agreed rates known as minimum support prices (MSP).

The government plans to buy 31.9 million tonnes of wheat in the marketing year from April 1, 12.7% higher than the 28.3 million tonnes bought from farmers in 2011/12, the food ministry has said. India grows one wheat crop, which is planted in November-December and harvested in March-April.

Prolonged winter weather and recent rainfall may delay wheat harvesting by at least a week in India's key grain producing northern states of Punjab and Haryana. Harvesting in Punjab and Haryana, the country's second and third biggest producers of wheat, usually begins from April 1.