Uncertainty over stocks keeps wheat futures on firm wicket

MUMBAI: Wheat futures ended higher on Saturday at the NCDEX platform with both the near-month and January contracts ending about half a per cent above the previous session's closing price at Rs 1,133 and 1,138.6 per quintal respectively.

The far months are in backwardation on the expectations of a better crop in ‘07 so the opportunity for investors, reiterate some analysts, lies in buying January and selling December, where the spread is expected to go up from Saturday's 5.6 as January is factoring in a low cost of carry.

Others like Sandeep Sabharwal of Delhi-based Sohanlal & Co — having interests in foodgrains, pulses and warehousing — believe it would not be too prudent to get into spreads unless an investor has a good amount of funding at her disposal. December-end, he says, will witness arrivals of imports and the impact of this could lend a bearish tone to January.

However, he adds, that since January and February are high consumption months there could be no guarantee that stocks with millers will be sufficient to meet consumption. The NCDEX wheat spot price at the Delhi mandi ended up over half a per cent at Rs 1,141.

Meanwhile, a report by UK's International Grain Council raises the world production forecast for the ‘07 crop in November to 587 million tonnes, 2 million tonnes above that in October, but still 31 million tonnes short of last year's total. Similarly, it has raised the consumption forecast by 1 million tonnes to 607 million tonnes. The report has attributed the increased production estimate to better-than-expected yields, mainly in Russia.

Forecast world wheat trade is 1 million tonnes lower than last month at 109 million tonnes compared with 108 million in ‘05-06, states the report.

The report goes on to state that despite higher prices curtailing demand in some countries in Africa and Near East Asia, import forecasts for Brazil and Chile have been raised further after smaller crops. Because of increased domestic use, the projection of Australia's marketing year exports is down 0.6 million tonnes at 12.9 million tonnes, but Russia may export 8.4 million tonnes, 0.4 million tonnes more than previously forecast.

Combined end-of-season stocks in the five major exporters — Argentina, Australia, Cananda, EU and the US —- are forecast unchanged at 32 million tonnes, 23 million less than a year before.

On wheat sowing for ‘07, IGC says: “With good sowing conditions in most northern hemisphere producers, total areas are still forecast to increase by 4%, reversing last year's fall.