Indian flour millers and the local units of global trading giants have sewn up deals to import five lakh tonnes of premium Australian wheat since March, trade sources said, the biggest such purchases in over a decade, despite surplus stocks at home.
Concerns that untimely rains in February and March would cut wheat output, especially of high-protein varieties grown in central India, first drove flour millers in the country’s southern ports to place the orders.
Attractive prices then prompted traders such as Cargill, Louis Dreyfus and Glencore to follow, said three sources directly involved in the deals.
| 1 | There are concerns that untimely rains in February and March would cut wheat output, especially of high-protein varieties grown in central India. |
| 2 | Industry and government officials estimate this year’s wheat output at about 90 million tonnes, nearly 5 per cent lower than the 2014 harvest, but still exceeding domestic demand of about 72 million tonnes. |
| 3 | Since wheat is largely grown in India’s Central and Northern plains, flour millers from Southern States sometimes find it attractive to import high-protein grades. |
The traders and millers could import another five lakh tonnes from France and Russia, where harvests are around the corner. The deals could further push up benchmark prices that have jumped recently on concerns about crop quality in the US.
“There are strong chances French and Russian wheat will find their way to India because of attractive prices and surplus stocks there, and if the euro goes down, I expect more French wheat coming to India,” said one source.
Almost half of the already-contracted quantity, bought at $255 to $275 per tonne, has reached India and the rest is scheduled for July delivery, said the sources, who declined to be identified because of the sensitivity of the subject.
Although rains and hailstorms wilted the wheat crop, India, the world’s second-biggest producer of the grain, has large stockpiles accumulated after eight straight years of bumper harvests.
Industry and government officials estimate this year’s wheat output at about 90 million tonnes, nearly 5 per cent lower than the 2014 harvest, but still exceeding domestic demand of about 72 million tonnes.
Since wheat is largely grown in India’s central and northern plains, flour millers from southern States, hemmed in by the Indian Ocean, sometimes find it attractive to import high-protein grades from Australia.
But this year’s unusually large volumes have surprised some.
“Other than large amounts of wheat that we’re importing, we see two other significant changes,” said one of the sources. “Perhaps for the first time some imports are taking place in vessels and perhaps for the first time millers will end up buying French and Russian wheat as well.”
At about $185 to $190 a tonne free on board, French and Russian wheat is attractive for India, said another source.
High-protein wheat in India costs more than $300 a tonne and imports could ebb if prices fall to about $283, the sources said.
But Russian wheat may not meet India’s quality requirements, despite its higher protein content than French wheat, said Tajinder Narang, a New Delhi-based trade analyst.
