June 12, 2012

India's wheat to remain at lower level

Despite a record surplus for the second straight year, Indian wheat futures are expected to remain steady at lower levels this week, analysts and traders said.

"Wheat futures are trading at over INR100 (US$1.78) lower than the minimum support price. Further decline in wheat futures is unlikely though higher availability from the record harvest could prevent upward movement in prices," said Manjit Singh, a trader from the northern state of Punjab, a major wheat grower.

Government agencies procure agri-commodities from farmers at a pre-agreed price, known as the minimum support price. 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$23) per 100 kilogrammes.

India is expected to produce a record 90.23 million tonnes of wheat in 2012, according to farm ministry data. The estimated output is higher than the 86.87 million tonnes produced in the previous year.

The country 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, the most-traded wheat July futures on the National Commodity and Derivatives Exchange was trading down 0.17% at INR1,165 (US$21) per 100 kilogrammes at 0952 GMT, after hitting a fresh contract low at INR1,163 (US$21).