Govt floats wheat import tender
The tender comes at a time when world wheat prices are falling. The downward trend might continue as harvest in exporting countries of northern hemisphere starts arriving.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: The government has floated a tender to import wheat, using a call option to hedge against rising prices. Multinational companies have been invited to offer bids for delivering wheat by November. Traders are keen to book contracts right away as they expect global prices to fall in a few months. But for India, this may not be the best way to get a good deal.
According to the tender floated on Saturday by National Collateral Management Services (an associate of National Commodity & Derivatives Exchange), on behalf of STC, bidders have to offer quotes for a strike price, option premium, quantity and ports of delivery. Bids will be opened on Tuesday at the NCMSL office in Mumbai.
The government has bought 1.8 lakh tonnes wheat from Cargill through a call option at $406/tonne, and c&f premium of $35/t, earlier this month. The option to ���call��� (seek delivery of) the cargo is to be exercised by July 15 by when there will be reasonable certainty about FCI procurement. The tenders come at a time when world wheat prices are cooling down.
On Friday, Chicago July contract ended at the lowest level since early February at $327/t, down $16. This is only the start of a downward shift in prices, which will accelerate as harvest in wheat exporting countries of the northern hemisphere starts arriving.
At current levels, if India imports wheat from USA it would land at $445/t. Since India will actually be offered wheat from Black Sea and Red Sea origins, that would be pegged at $400/t right now. But just a couple of months later, wheat would become much cheaper.
���It is in traders��� interest to want to book India���s demand contract because they want to maximise profits. They know prices will decline later in the year. This call option comes at the right time for them,������ they said.
According to the tender floated on Saturday by National Collateral Management Services (an associate of National Commodity & Derivatives Exchange), on behalf of STC, bidders have to offer quotes for a strike price, option premium, quantity and ports of delivery. Bids will be opened on Tuesday at the NCMSL office in Mumbai.
The government has bought 1.8 lakh tonnes wheat from Cargill through a call option at $406/tonne, and c&f premium of $35/t, earlier this month. The option to ���call��� (seek delivery of) the cargo is to be exercised by July 15 by when there will be reasonable certainty about FCI procurement. The tenders come at a time when world wheat prices are cooling down.
On Friday, Chicago July contract ended at the lowest level since early February at $327/t, down $16. This is only the start of a downward shift in prices, which will accelerate as harvest in wheat exporting countries of the northern hemisphere starts arriving.
At current levels, if India imports wheat from USA it would land at $445/t. Since India will actually be offered wheat from Black Sea and Red Sea origins, that would be pegged at $400/t right now. But just a couple of months later, wheat would become much cheaper.
���It is in traders��� interest to want to book India���s demand contract because they want to maximise profits. They know prices will decline later in the year. This call option comes at the right time for them,������ they said.
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