Chicago bulls play the shots here

NEW DELHI: Chicago is grabbing the eyeballs. Everyone — from small millers in Tamil Nadu to large traders in Khanna — has started tracking world wheat prices on (Chicago Board of Trade) CBOT instead of obsessing over the local bhav on NCDEX. And they have reason.

With the domestic market poised to align itself with international prices, foreign ships bearing grain will determine prices in India for the next six months.

“CBOT is providing a strong undercurrent to the local wheat market because its rates will decide where prices go from here. Though most people are not trading on Chicago, they are now fully aware of its immediate importance,” said a trader.
CBOT itself is keen to attract business from India by launching farm futures on its electronic platform.

Indian traders can use CBOT during its day time sessions (7-11.45 pm Indian time) for wheat, corn, soya complex and rice. Traders with associates in Singapore and Hong Kong are especially keen to take advantage of this CBOT trading platform.

For consumers, the alignment is good news because the worst is over. Atta prices are unlikely to rise significantly in the coming days. The reduction in customs duty to 5% has made imported wheat an increasingly viable proposition for local millers, especially in the south.

While Indian wheat is available down south for $193/tonne, imported wheat is being offered for anything between $194-220/tonne, depending on quality. Ships bearing Ukrainian and Canadian wheat have started arriving in southern ports and Mumbai. Contracts will pick up speed once local wheat prices move up a tad further to cross $195/tonne.

While the government is expected to import 4.5m tonnes wheat for ration shops, private traders are expected to import another 1 million tonnes for industrial use.

Now that the gap has narrowed between local and foreign prices, imported wheat will also act as a ceiling on local prices. India’s market will settle at the level of the cheapest wheat, most likely from overseas. For wheat traders, this alignment with international prices takes away some of the pressure created by high volatility between April to June.

Like cooking oil prices, which are completely determined by landed cost of imported oil, wheat prices too will become far more predictable over the next few months.

For hedgers too, stability in the market can only be good news. Once imported grain sets the price cap, no speculator can play on the market by taking positions to push it up artificially.

Meanwhile, though trading volumes remain high on NCDEX, wheat traders on the exchange have been buffeted by overzealous tightening of rules by the Forward Markets Commission (FMC).