Govt has no option but to tap wheat imports at high prices

NEW DELHI: The government, which has helped push wheat prices into unchartered territory with its heady appetite, could take a short breather from buying but will soon be back scouring increasingly barren world markets for shipments.

Despite being the world’s second largest wheat producer, The government has floated seven import tenders since February last year, and each time it has contributed to a flare up in global prices.

The country paid $178.75 per tonne for wheat in February 2006, its first overseas purchase in six years, but had to shell out a whopping $390 per tonne for its latest order this month. Analysts said the government had little option except to import, even at high prices. “It is true that prices are very high and there is political opposition, subsidy problems ... and these are getting magnified but the government has no choice,” said , Foretell Business Solutions’ director G Srivastava. He said the most the government could do was to take a breather and wait for prices to cool before stepping into the market again.

The State Trading Corporation has already bought 1.3 million tonnes of wheat this year but it is still short of the four million tonnes the government requires to build stocks ahead of the next harvest in April.

“Prices are bound to rise, but the fear is we may be left with a situation where there is nothing to buy,” said one government official. The government purchased five million tonnes of wheat in 2006 after domestic output fell and stocks dwindled. New Delhi’s import plans at a huge cost to the exchequer have drawn protests from both its backers and opponents.

Wheat futures on the Chicago Board of Trade hit a new record early on Monday with the December wheat rising 21 cents to more than $8.64 per bushel. Iraq, the latest in a long line of buyers, issued a tender on Sunday to buy at least 50,000 tonnes. “Everything has a cycle. Global prices have been going up for too long and there will be a bearish cycle,” said Mr Srivastava, adding “We expect the next breather will be in a month’s time, and one more spike in prices will be there.”

Wheat prices have been rising in recent months, with crops in Eastern Europe devastated by a drought while heavy rains hit Western Europe’s output. Australia’s export hopes also remained on a knife-edge after rain failed to arrive over the weekend. Rabobank, an International farm-trade specialist, on Monday cut its forecast for Australia’s wheat crop to between 15 million tonnes and 19 million tonnes, from its previous forecast of 20 million tonnes a week ago.