Delhi for more wheat imports
In a bid to improve food security, the Centre is gearing up for more wheat imports in coming months through tenders floated by State Trading Corporation (STC).
By TNN |
NEW DELHI: In a bid to improve food security, the Centre is gearing up for more wheat imports in coming months through tenders floated by State Trading Corporation (STC), irrespective of the high price it may have to pay for it. “The government has decided to purchase 5.11 lakh tonnes of wheat in July. In the coming months, the government would ask STC to float tenders for purchase of more wheat from the international market after taking into account the requirement, availability and price trends,” an official statement said. The STC will pay an average $320 per tonne for the wheat being imported in July.
The statement stressed that the decision to import wheat despite comparatively high prices (it paid a weighted average of $205.3 per tonne last year for imports of 5.5 million tonnes) was imperative to ensure that food security is not compromised.
Justifying its decision to import, price notwithstanding, the government stressed that following the downgrading of world output by the USDA in its report, world prices have risen sharply. Further, CBOT futures for September, December, 2007 and March, 2008 showed a bullish trend, pointing towards higher prices in the international market in the months to come. “Despite the best efforts, the government could procure only about 111.00 lakh tonnes of wheat from the domestic market,” the statement said.
As part of its defence on why it had to cancel the earlier May tender for import of 1 million tonne despite its food security compulsions, the government admitted that it may have miscalculated on the question of lower prices in the global market in the July/August and November/December periods, after harvests in major wheat producer countries. After negotiations, the STC recommended buys of 3.06 million tonnes at the time (against a total import decision of five million tonne) at the price of $263 FOB. However, expectations of a price dip later in the season was a key reason why that tender was scrapped subsequently. In doing that, the statement said the government relied on the STC’s own position that said, “There are possibilities for softening of prices for arrival beyond August, 2007 as compared to June–August prices received in the tender. The Australian crop to be harvested during November-December, 2007, which is reported to be good as per IGC Report, may also have a softening effect on the wheat prices.”
The government now says that the USDA’s June 11 report, which downgraded the world production of wheat to 610 million tonnes, was what primarily led to the increase in the wheat prices in the international market, leading to the decision to scrap the STC tender. In end May, CBOT futures were in the range of $170-180 per tonne with no indications of a spurt in the near future, the statement held.
By May 26, domestic procurement price worked out lower (at Rs 850+ per quintal) than imported wheat, which worked out to Rs 1,103 per quintal. But this price difference, if bridged, could lead to hoarding of wheat stocks by farmers and traders, it was felt. Given the tight domestic wheat arrivals at the mandis at the time, it was decided not to procure the full PDS requirements from the market since that could add to short supply in the open market and spur high prices and inflation.
The statement stressed that the decision to import wheat despite comparatively high prices (it paid a weighted average of $205.3 per tonne last year for imports of 5.5 million tonnes) was imperative to ensure that food security is not compromised.
Justifying its decision to import, price notwithstanding, the government stressed that following the downgrading of world output by the USDA in its report, world prices have risen sharply. Further, CBOT futures for September, December, 2007 and March, 2008 showed a bullish trend, pointing towards higher prices in the international market in the months to come. “Despite the best efforts, the government could procure only about 111.00 lakh tonnes of wheat from the domestic market,” the statement said.
As part of its defence on why it had to cancel the earlier May tender for import of 1 million tonne despite its food security compulsions, the government admitted that it may have miscalculated on the question of lower prices in the global market in the July/August and November/December periods, after harvests in major wheat producer countries. After negotiations, the STC recommended buys of 3.06 million tonnes at the time (against a total import decision of five million tonne) at the price of $263 FOB. However, expectations of a price dip later in the season was a key reason why that tender was scrapped subsequently. In doing that, the statement said the government relied on the STC’s own position that said, “There are possibilities for softening of prices for arrival beyond August, 2007 as compared to June–August prices received in the tender. The Australian crop to be harvested during November-December, 2007, which is reported to be good as per IGC Report, may also have a softening effect on the wheat prices.”
The government now says that the USDA’s June 11 report, which downgraded the world production of wheat to 610 million tonnes, was what primarily led to the increase in the wheat prices in the international market, leading to the decision to scrap the STC tender. In end May, CBOT futures were in the range of $170-180 per tonne with no indications of a spurt in the near future, the statement held.
By May 26, domestic procurement price worked out lower (at Rs 850+ per quintal) than imported wheat, which worked out to Rs 1,103 per quintal. But this price difference, if bridged, could lead to hoarding of wheat stocks by farmers and traders, it was felt. Given the tight domestic wheat arrivals at the mandis at the time, it was decided not to procure the full PDS requirements from the market since that could add to short supply in the open market and spur high prices and inflation.
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