India's wheat exports are poised to fall this year as an increase in supplies from Australia, Russia and Europe has pulled down global prices and made shipments from India non-viable. This could put pressure on the government as it would be forced to procure more of the grain at the state-set price as India is expected to have another bumper harvest.
Trading companies from US-based Cargill to local major ITC aren't signing contracts for the new crop to be harvested in April-May as prices at $275 a tonne were too high, said industry executives.
In comparison, French wheat is available at $210. Indian wheat is usually in demand in the Gulf and African countries for milling and in southeast Asian countries for animal feed. "French milling wheat is now the flavour of the season," said Tejinder Narang, a grain analyst in New Delhi.
"The price of French wheat climbed down from $245 to $210 free-on-board (fob) with the depreciation of the euro."
According to him, French 'feed' wheat is available still cheaper, at $200 a tonne.February-March is usually the time when trading companies like ITC, Cargill, Olam, Louis Dreyfus, Glencore, Emmsons, Noble, Midstar, Concordia and Bagadiya Brothers start signing forwardcontracts for delivery in April. This has not been the case as of now.
The weakening euro and a stronger rupee have both enlarged the spread of disparity. Even the US soft red winter wheat is quoted cheaper than Indian variety, at around $232 fob.
"This year, commitment for a new crop for shipments from March till May has been nil. Compared to it, in the previous year it was 2.5-3 lakh tonne," said Rajnikant Rai, COO of ITC's agribusiness.
How the market forces unfold globally and domestically during April-June would decide future possibilities of shipments, companies and traders said. This will also be the time when the new crop from Russia and Ukraine will start arriving.
Narang said with no takers for Indian grain in the export market, the pressure on government procurement at the minimum support price is sure to build up.
"The government will end up buying again 30-32 million tonne of wheat in April-May 2015 unless there is some dramatic reversal in the market or the rupee depreciates to 65-66 to a dollar, a possibility that appears to be remote.
Souce:- economictimes.indiatimes.com
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