Millers fear high import rates may push up wheat prices

MUMBAI: Wheat flour millers fear that the government’s decision to import wheat at higher-than-domestic prices, may jack up rates of the commodity in the local markets. The government has decided to import close to 7.9 lakh tonne of wheat at an average price of $389 per tonne through the STC.

These prices are 20% higher than the last round imports — 5.1 lakh tonne, which was closed at $325.59 per tonne. The latest import price is about 90% higher then the minimum support price of Rs 850 per quintal, that has been fixed for the current marketing period that ended in June.

Roller Flour Miller Federation of India, secretary, Veena Sharma said that high wheat import prices may send a signal to the local traders that government anticipates high wheat prices in future.

“Imported wheat would land here at approximately Rs 17 per kg whereas domestic prices currently range between Rs 9.50 and Rs 11 per kg for the millers quality,” Ms Sharma said. Rather than floating global tenders, the government should have floated local tenders because there is enough wheat production reported in the country, she added.

The government view, however, is that it is necessary to create a buffer stock in the country as prices may increase in the future. Futures wheat prices on CBOT have spiked from levels of $5.97 per bushel on June 30, to a high of $8.05 on August 31. It closed at $ 7.75 on Monday.

Haryana Flour Mill Association president CP Gupta said farmers will sell their wheat stocks in next two months to the traders, who would then look at the imported prices and increase their offer prices. Currently the price of mill quality wheat in Haryana is between Rs 9.50 and Rs 10 per kg.

Commodity exchange officials feel that a futures contract would have provided an opportunity for the importing agencies to hedge the price. The government had banned futures trading in wheat in February this year on inflationary concerns. NCDEX chief economist Madan Sabnavis says: “NCDEX had 70% correlation with the wheat futures on CBOT and had the government agencies taken a position through the wheat futures contract, they could have offset high prices”.

Karnataka Roller Flour Mill Association president Pramod Kumar said if prices were to go up, they would have by now. “Prices have remained steady and in the long run they can go up with the market fundamentals,” he said. The prices of mill quality wheat at Karnataka is ranging between Rs 11.95 and 12.15 per kg.

Mr Sabnavis further said that at one end the government has to ensure that farmers get remunerative prices and at the other hand it has to create buffer stock and it cannot reconcile these in the current scenario.