August 3, 2006

 

India expected to bite the bullet and accept high wheat prices
 

 

Price bids for India's latest wheat import tender are expected to be much higher than earlier offers, but the government would be forced to accept such prices due to falling stocks, traders said on Wednesday (Aug 2).

 

More bids for India's current 400,000 tonne tender was expected thanks to eased quality specifications, terms and conditions.

 

India last week floated the fresh tender, adding to the 3.5 million tonnes already contracted to boost government stocks it uses to provide grains to the poor at discounted rates.

 

Bid prices are expected to range much above US$200 a tonne as international prices have firmed up, said an official with a Mumbai-based international trading firm.

 

India concluded a 2.2-million-tonne wheat import deal in June with five international bidders in the price range of US$196 to US$205 per tonne, cost and freight.

 

The State Trading Corp.'s (STC) latest tender for duty-free wheat closes on Aug 3 and offers would be valid until Aug 11. This is the fourth such tender floated by the agency since February.

 

The wheat would have to arrive between September and October at the four southern ports of Vishakapatnam, Chennai, Kochi and Tuticorin.

 

Traders said the government was in dire need of wheat for forthcoming festival months and to meet higher demand in winter. Thus, it is likely to finalise the contracts soon as the supply shortage is not likely to ease by October, said the official.

 

Atul Chaturvedi, President of Adani Exports, said wheat prices were firm globally due to tight supplies.

 

Officials have managed to buy just 9.2 million tonnes of wheat from domestic farmers this year against original estimates of 16.2 million as market prices stayed above those offered by state agencies.

 

As of Jul 1, government stocks of wheat were estimated at 8.2 million tonnes, nearly nine million tonnes lower than the minimum required level.

 

According to the latest farm ministry estimates, output was expected to be around 69.5 million tonnes, 6 million tonnes short of the target of 75.5 million tonnes.