New Delhi: Indian flour millers and global trading companies have sewn up deals to import 500,000 tonnes of premium Australian wheat since March, trade sources said, the biggest such purchases in more than a decade despite surplus stocks at home.
Concerns that untimely rains in February and March would cut wheat output, especially of high-protein varieties used to make pizzas and pasta, first drove millers in India'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.
The traders and millers could import a further 500,000 tonnes from France and Russia, where harvests are around the corner. The deals could push up benchmark prices that have already jumped on recent concerns about crop quality in the United States.
"There are strong chances French and Russian wheat will find their way to India because of attractive prices ... and if the euro goes down, I expect more French wheat coming to India," one source said.
Almost half of the quantity contracted so far -- bought at $255 to $275 a tonne -- has reached India and the rest is scheduled for July delivery, said the sources, who declined to be identified because they are not allowed to discuss trade-sensitive issues publicly.
Although rains and hailstorms wilted the Indian wheat crop, the world's second-biggest producer and consumer of the grain has large stockpiles accumulated after eight straight years of bumper harvests.
MONSOON CONCERNS
But the government is likely to draw heavily from its warehouses this year if monsoon rains, critical for farm irrigation, turn out to be deficient, thereby fueling food inflation. India's weather office has cut this year's monsoon forecast to 88 percent of a long-term average, raising fears of the first drought in six years.
Industry and government officials estimate this year's wheat output at about 90 million tonnes, nearly 5 percent 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 on a free-on-board basis, French and Russian wheat is attractive for India, another source said.
High-protein wheat in India costs more than $300 a tonne and imports could ebb if prices fall to about $283, the sources said.
Russian wheat, however, could fall short of India's quality requirements despite a higher protein content than French wheat, said Tajinder Narang, a New Delhi-based trade analyst.
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