Multinational companies and exporters are taking advantage of lower wheat prices in the country.
They are now buying wheat at prices lower than the minimum support price of Rs 12,750 a tonne fixed by the Government and moving it to ports.
This is because while wheat in most Uttar Pradesh markets is ruling below Rs 12,000, wheat of Black Sea origin is quoted at $278 (above Rs 15,500) a tonne for September delivery. The quality of Black Sea wheat, grown in Russia and Ukraine, is seen at a par with Indian milling wheat.
Since June 15, wheat prices have increased 31 per cent in the global market on fears over dry weather affecting the US crop. On Thursday, wheat was quoted at $8.4475 a bushel ($310/Rs 17,700 a tonne) on the Chicago Board of Trade.
The movement of wheat to port towns has led to traders in the North cancelling their supply contracts with flour mills in South, particularly Tamil Nadu.
“Until a week ago, we were getting wheat delivered in Tamil Nadu at Rs 14,750 a tonne. But now, no one is coming forward to supply even at Rs 16,000,” said Mr M.V. Balasubramanian, Managing Director of Sarathy Enterprises (formerly Narasu’s Roller Flour Mills).
The problem for mills in Tamil Nadu is that they have to buy some 2,050 tonnes to transport wheat by rail rakes. “We have to order rakes two months ahead,” said Mr Balasubramaniam.
“We face an uphill task of getting supplies since the Centre has allotted only 90,000 tonnes till September under the Open Market Sale Scheme (OMSS). Karnataka, on the other hand, has been allotted 2.34 lakh tonnes,” said Mr K.S. Kamalakannan, President, Tamil Nadu Roller Flour Mills Association.
Under OMSS, wheat is being sold at Rs 11,700 a tonne from stocks held by the Food Corporation of India. In the first OMSS auction on Wednesday, 50 per cent of the allocation made for Tamil Nadu was lopped off.
“The rest could be bought off in the next auctions on July 18,” said Mr Balasubramaniam.
Wheat being moved to the ports is either last year’s stock or diverted from the public distribution system, said a South-based miller.
While Tamil Nadu millers are seeking a cap on exports, millers from other States want the quota under OMSS to be raised.
Meanwhile, the State Trading Corporation has cancelled sale of 98,000 tonnes wheat for exports to the Swiss firm Glencore. While 30,000 tonnes of wheat were to be sold at $230 a tonne, the rest was to be sold at $228.