January 3, 2013

India to see declining futures for wheat

Wheat futures in India are likely to see further losses this week, after declining on January 2, due to conducive weather conditions in main growing areas and an expected improvement in supplies to spot markets.

Wheat planting in India has been trailing marginally in the current season at 27.3 million hectares as against 27.7 million hectares in the previous season. However, a recent drop in temperature in key growing areas has raised hopes of better yields and is weighing on sentiment, traders said.

India grows one wheat crop, which is planted in November-December and harvested in April-May. Low temperatures in December and January are good for the growth of wheat plants.

Additional pressure on wheat prices is expected to come from bulging stocks in government warehouses which were at a whopping 37.6 million tonnes on December.1, more than three times the target of 11 million tonnes.

Key January wheat futures on the National Commodity and Derivatives Exchange (NCDEX) fell more than 1% in December on a drop in demand with the end of the festive season and as supplies improved after the government ordered selling of an additional 6.5 million tonnes from state-run companies' warehouses to curb rising food prices.

Reddy expects wheat futures to fall further this week on a potent combination of higher supplies in spot markets and softening global prices which could cut demand for Indian wheat in overseas markets.

Local prices could get some support from the government's decision to pay 5.1% more for purchases of wheat compared with the previous year and to raise the wheat export limit for 2013 by 500,000 tonnes from a year ago on hopes of a bumper harvest.