July 3, 2007

 

India plans to buy wheat from Canada, EU after failed purchase from US

 

 

After botched plans to buy from the US, India is eyeing Canada and Europe for its wheat purchases despite the grain's high prices.

 

India has been seeking to buy 1 million tonnes of wheat in May but backed away from making deals due to exorbitant prices. And despite soaring prices to 11-year highs, India returned to the market with a tender for 1 million tonnes.

 

Avinash Raheja, an analyst with Commtrendz Risk Management said New Delhi is scrambling to fill the gap despite the prices with the wheat market drying up and limited options. He added India can seek European markets for wheat aside from US.

 

A government official involved in the tender negotiations said failure to purchase the wheat now won't have any more opportunities to procure wheat this year.

 

Traders said India's wheat market options are limited as Australia's crop won't be available until November and US wheat suppliers are unlikely to meet New Delhi's tender specifications.

 

Last year, the United States did not sell any wheat to India because of frustrations over the bidding process. New Delhi imposed a number of conditions on how cargoes would be fumigated, inspected, and sampled.

 

Raheja said the US market is already "out" of India's choices due to phyto-sanitary norms.

 

Farm Minister Sharad Pawar has said India would need to import 5 million tonnes of the grain between August and December, but traders expect India to import less because of big purchases from its own farmers.

 

Some analysts expect the government to buy at least two million tonnes of wheat before December as traders expect India to receive bids for the latest tender at around US$320 a tonne including cost and freight. The price is 20 percent higher than the US$263 New Delhi cancelled on its May tender.

 

And this time, India will probably be forced to buy as analysts expect little reprieve in global prices due to declining world wheat stocks from main suppliers falling to their lowest in 30 years. The US is experiencing erratic weather disrupting harvest, and drought in Ukraine and Russia.

 

In April, the government had wheat stocks of about 4.5 million tonnes and will still need 13 million tonnes of the grain. State-run agencies have so far bought close to 11.5 million tonnes of wheat from farmers.

 

India annually produces about 70 million tonnes of wheat and most of it is consumed by its one billion plus population.

 

Wheat in the southern states, the region which does not grows wheat, was quoted at around 11,700 rupees a tonne, or US$286, nearly 1,000 rupees a tonne higher than last year.