September 4, 2012

India offers 1.3 million tonnes wheat for open sale

In order to ease shortages in spot markets, India has decided to make available 1.3 million tonnes of additional wheat for open sale in September and October, a move that is likely to weigh on domestic prices.

Millers can now request supplies amounting to up to 1.3 million tonnes out of a total of three million tonnes agreed by ministers in July. Until now, only 1.3 million tonnes of that had been released.

"A big delegation of around 150 millers today met the food minister, and he assured (them) the government will take all necessary steps to ensure adequate wheat supplies to mills," said R.K. Garg, president of the Roller Flour Millers Federation of India.

India, the world's second-largest producer of wheat after China, is sitting on huge wheat stocks after several bumper harvests. Inventories at government warehouses reached of 47.5 million tonnes on August 1, more than three times the official target.

New Delhi has even allowed wheat exports of two million tonnes to trim the bulging stocks and has been selling parcels through tenders by its state-run traders.

Traders said the prospect that supplies would go the domestic market in the forthcoming festival season in September and October pushed wheat futures down sharply on Monday (Sep 3) and that prices could fall further this week.

The October wheat contract on the National Commodity and Derivatives Exchange (NCDEX) closed down 2.38% at INR1,517 (US$27.27) per 100 kilogrammes on Monday (Sep 3).

In the Delhi spot market, wheat fell INR41 (US$0.74) to INR1,559 (US$28) per 100 kilogrammes.