Centre plans to cut floor price for wheat exports to boost shipments

Written by feBureau | New Delhi | Updated: May 1 2013, 07:00am hrs
The government is considering lowering the benchmark price of wheat for exports to ease storage due to a lukewarm response to the tenders floated by the FCI.

"It's (lowering the price) on the cards to attract more players for bidding. We may place a proposal for this purpose soon before the group of ministers," a senior government official told FE. The FCI started the process on Monday, inviting bids for about one million tonnes of wheat.

A panel of ministers, headed by agriculture minister Sharad Pawar, had decided on March 7 to allow an additional five million tonnes of wheat exports from the official reserve at a floor price of Rs 14,840 (around $270) per tonne. Private players would initially be allowed to ship wheat from godowns in Punjab, and they had to bear the transportation costs until the port for exports, the panel had decided. Earlier, only state-run trading firms were allowed to export 4.5 million tonne from the official reserves, of which 3.6 million tonne had been shipped.

Traders said at the current floor rate, the Indian wheat price will work out to $315 per tonne, freight on board. By contrast, US soft red winter wheat prices dropped to an average of $285.87 per tonne in March, more than 17% down from the November level, although global prices have inched up a bit recently.

Moreover, wheat from the Black Sea region is cheaper by around $30 a tonne, compared with the US wheat, which means elevated prices of Indian wheat may act as a spoil sport.

The FCI invited two bids at a floor rate of R1,484 per quintal. There was no participation in the first tender, as private traders considered the bechmark price too high.

Global wheat prices started moderating steadily, albeit at a slow pace, since November on anticipations of better harvest in 2013-14. After soaring by about 32% until November on smaller harvests in the US, Russia and Ukraine due to dry spells, wheat prices ended the year with a 26% gain and dropped further until recently.

Wheat gained for a second straight session on Tuesday as expectations of damage from harsh US winter drove up the market, responding to the rally in corn. Wheat for May delivery on the Chicago Board Of Trade gained 0.1% to $7.10-1/2 a bushel. However, trade executives say global prices may still ease from July when spring wheat supplies from key exporter US flood the market and the Centre has the scope to ship as much as possible until then.