May 26, 2010

Indian wheat futures up on state output drop

Indian wheat futures were higher on Wednesday (May 26) afternoon on a drop in a key state's output, but supply hopes trimmed gains.

The most-active June wheat contract NWTM0 was at INR1,230 (US$26) per 100 kg, up 0.61% at 1:37 p.m.

Wheat output in Uttar Pradesh, India's biggest producing state, is likely to drop by up to 1.5 million tonnes from initial estimates of 29.1 million tonnes, a senior state farm department official said earlier this month.

Wheat prices have risen about 11% in the past two weeks at Hardoi, a trading centre in Uttar Pradesh, traders said.

Uttar Pradesh has seen significant interest from private buyers as well, which supported prices. "There is strong demand from south Indian states," said Kapil Yadav, a trader from Shahjahanpur in Uttar Pradesh.

The federal government last week said India's wheat output is likely to be 80.98 million tonnes. The Indian government will provide three million tonnes of subsidised grain in aid for states in the next six months, Farm Minister Sharad Pawar said earlier this month.

India's wheat inventories on May 1 were at 30.8 million tonnes against the target of four million tonnes.