May 2, 2012

India's wheat likely to fall on higher supplies

For the third straight week on increased supplies from the new season crop in spot markets, Indian wheat futures are likely to extend losses.

Wheat output in India, the world's second-biggest producer, is seen at a record 90.23 million tonnes in 2012, Farm Minister Sharad Pawar said last week, boosting chances of additional shipments.

The estimated output is higher than the 86.87 million tonnes the country produced in the previous year. India consumes about 76 million tonnes of wheat a year. It grows one wheat crop, which is planted in November-December and harvested in March-April.

On Monday (Apr 30), the most-traded wheat for May delivery on the National Commodity and Derivatives Exchange (NCDEX) was 0.33% down at INR1,196 (US$22.57) per 100 kilogrammes at 4:30 p.m. local time.

"Overall fundamental for wheat is bearish. Prices could fall by up to INR20 (US$0.37) this week," said Chowda Reddy, senior analyst with JRG Wealth Management.

India has allowed exports of two million tonnes of the grain, easing an early 2007 ban on overseas sales. Indian wheat exports will have to compete with cheaper Black Sea origin supplies.

Last year, the government said it would pay 10% more to farmers for wheat in 2012 and raised the minimum support price to INR1,285 (US$24.2) 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.