Wheat imports get a crude shock

NEW DELHI: Wheat consumers are directly hit by the spurt in international crude oil prices. Foreign shippers are now charging Rs 750 extra for every tonne of wheat they bring from Europe to India. That has made imported wheat more expensive.

At the same time a bidding war is on between atta and biscuit companies to pick up maximum sacks from the local market. The upshot of both is that wheat has become dearer by Rs 500/tonne in just seven days.

Markets are already reflecting this sentiment. NCDEX wheat futures were on a bull run on Thursday. Wheat September contract hit a high of Rs 969.20 for the first time since May ’06. Traders say there has been a $15/tonne increase in ocean freight between Europe and India due to the rise in fuel costs. That translates to a Rs 750-per-tonne increase in landed cost.

However, with the simultaneous increase in the price of wheat itself, the overall impact is much higher.

“Due to concerns over the impact of hot weather on crop sizes in Australia and Europe, the international market is firming up. While Canadian, French and Swedish wheat is being quoted at $210/tonne, Australian wheat is being quoted at $225/tonne,” said a Delhi-based trader.

Meanwhile, in the local market a mad scramble is now on between millers themselves to pick up as much quantity as possible. Millers in the north are faced with empty warehouses and zero sales from FCI.

In order to continue making bread, atta and biscuits till March next year, they have to buy as much wheat as possible. Local wheat is still cheaper than importing wheat at Kandla port and transporting it to the north.

But they are not the only bidders. Mills in the south are now also in the fray. “Till last month all hopes had been pegged on Ukrainian wheat. But once the ship docked at Tuticorin and we saw the poor quality of wheat, we knew it would be possible to depend upon it. It has 14% moisture that makes it quick to rot and reddish in colour.

In comparison our own wheat is far superior with 10% moisture only. So we would rather buy first from the north as it is far more cost effective even now,” said a Chennai miller.

Both northern and southern companies are now booking orders in Delhi and Khanna mandis as fast as possible. Since supplies are unable to keep pace with demand, prices are rising smartly.

Wheat for ready delivery was quoting higher by Rs 48.75/quintal in Khanna on Thursday, a gain of 5.4% in the last two days. Delhi spot was quoted at Rs 954.45 a quintal, up by Rs 13.45 a quintal from Monday.

Even so, traders are expecting the market to stabilise soon. Once the prices rise another few hundred rupees, imported wheat of equivalent quality from Canada and France will become cost-effective for southern millers, making them withdraw from the north.