Wheat comes calling at $380-450/t

NEW DELHI: The world���s top food trading companies are doing brisk business here as the country gears up to deal with shortages. The four biggest international grain traders ��� Cargill, Louis Dreyfus, Glencore and Toepher ��� have offered wheat call options to STC. The price offered ranges from $380-450 per tonne for 2.50 lakh tonnes.

For supplying vegetable oil to ration shops, public sector PEC has bought palmolein from three edible oil giants: Intercontinental Oils & Fats of Malaysia���s Musim Mastika group, Wilmar International and Louis Dreyfus, and crude soya oil from domestic company, JK International. The companies will supply 24,000 tonnes RBD palmolein and 25,000 tonnes soya oil.

JK International has bought crude soya oil from Louis Dreyfus overseas and it would land at Rs 58 per kg. Palmolein from Indonesia would land at Rs 53 per kg. Deliveries on east and west coasts are expected by May.

In wheat, since no company is sure of the country from where they will buy wheat for delivering to India, the risk premium ranges from $25 per tonne to $35 per tonne. While Glencore has offered the cheapest wheat at $380 per tonne with a $35-per-tonne risk premium, Louis Dreyfus is the most expensive at $450 per tonne with $37.50-per-tonne risk premium. Kandla and Mundra are the ports of choice for sellers.

However, once harvests in wheat-exporting nations actually begin, everyone would be clear about the actual price, quantity and freight rates. ���In case India floats a simple purchase tender by July-August, it would directly benefit from substantially-lower world market prices and without incurring a loss on call option premium,��� a market watcher said here.

Call options are most useful when there is uncertainty over whether or not a buyer will need to purchase wheat. However, India has little choice on importing wheat this year because it needs to build a 3-million-tonne safety stock apart from the buffer stock.

In a year when wheat will have to pick up the slack from rice, which is in short supply, there is every likelihood the country will import wheat. ���Since there is no doubt over import, why incur the unnecessary expense of paying $30 per tonne or Rs 1,000 per tonne as option money to traders overseas?��� sources said.

Traders, however, say OTC call options are the best hedge for the country since it can get out of its buying commitment by simply paying Rs 1,000 per tonne. ���FCI���s procurement has been brisk and crossed 4 million tonnes. So, there is a good chance the country may not need to import wheat after all,��� they pointed out.