June 27, 2012

 

India sells 200,000 tonnes new-crop wheat to the Middle East

 

 

As a rally in global prices and the weakening currency of the South Asian nation make exports competitive, around 200,000 tonnes of new-crop Indian wheat have been bought by the Middle East and more deals are likely, grains traders said on Tuesday (June 26).

 

"Indian wheat has been moving to the Middle East but now there should be more interest," said one Singapore-based trader. "The spread between Indian and Australian wheat is around US$30-40 today, which is very attractive."

 

US wheat futures was little changed at around nine-month highs on Tuesday, after climbing more than 7% in the last session, tracking gains in corn and on expectations of lower production from the Black Sea region.

 

In the cash market, Indian wheat is quoted at around US$255 a tonne free on board (FOB), compared with US$295 a tonne being offered for Australian wheat. In the Middle East, Indian wheat is being offered at around US$280 a tonne, including cost and freight (C&F), while rival Black Sea cargoes are being quoted at close to US$315 a tonne.

 

Aiding Indian wheat exports is the embattled rupee, which has hit a succession of record lows this year. It has fallen about 7% year-to-date, making it the worst performing currency monitored daily in Asia by Reuters.

 

India, the world's second-biggest rice and wheat producer, is grappling with storage problems due to bumper harvests in recent years. Grain stocks at government warehouses were at a record 82.4 million tonnes on June 1 against 63.0 million tonnes of storage space, forcing authorities to store grains in the open. Officials concede that six million tonnes of grains could rot due to lack of storage space, but analysts say the losses could be higher as more than 19 million tonnes lie in the open.

 

Chicago Board of Trade front-month wheat has gained almost 19% in seven trading sessions, the biggest such gain in almost a year. The rally has been mainly triggered by a drought in the US grain-belt and forecasts of lower output in Russia and Ukraine.

 

Ukraine's 2012 grain harvest is likely to total 43-44 million tonnes, compared with a record 56.7 million tonnes in 2011 due a sharp decrease in wheat output, a senior weather forecaster said on Monday (June 25).

 

Russia's Agriculture Ministry and a leading analyst cut their 2012-13 grain crop and export forecasts on Monday after winterkill and spring drought caused yields to fall. For the new season the ministry cut its wheat crop forecast to 46-49 million tonnes from 57 million tonnes expected earlier, a government source said.

 

At the same time, India, which is sitting on a burdensome stockpile of wheat, has been trying to sell grains, including to sanctions-hit Iran. India could export up to three million tonnes of wheat to Iran if supplies are requested, Food Minister K.V. Thomas said, as India seeks to reduce huge wheat stocks and help settle payment for a large oil import bill.

 

"Indian wheat is cheapest in the world at the moment," said another Singapore-based grains trader. "It is even cheaper than feed wheat."